Do quants pose a threat to traders?

S

spectastic

I don't know that much about quants, but my understanding is they focus almost exclusively on micro time frames and arbitrage opportunities. There are other automated systems that trade on larger time frames, but those are no different than hand traders, except the executions are done without human error, provided they were programmed correctly. I'm probably wrong, so please correct me.

And because the market is a zero sum game, if the big banks are hiring theoretical physicists from mit to help them make money, then someone else has to lose. So my question is who are the losers? Is it always retail traders, more specifically day traders, or are the quants competing against each other, and hand traders are by and large isolated from them.
 
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spectastic said:
then someone else has to lose.
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Hi Spectastic,

I suggest you read the excellent book "Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio", by Sal Arnuk.

From the cover:

"An unrelenting focus on technology, hyper-short-term trading, speed, and volume has eclipsed sanity: markets have been hijacked by high-powered interests at the expense of investors and the entire capital-raising process. A small consortium of players is making billions by skimming and scalping unaware investors -- and, in so doing, they've transformed our markets from the world's envy into a barren wasteland of terror. "
 
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tayte said:
"hand traders" lol

so you think the market is a "zero sum game"? did you know that there's something called "Transaction Cost"?
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transaction costs aren’t like a rake at the poker table.

markets aren’t zero sum because the underlying asset (the economy is generally growing in real terms and there is generally inflation). Trading is just divying up that growth.
 
This idea must apply to really big retail traders who push millions of shares per day. Because other than that, what "investor" gives a damn about their portfolio shares that they sell after 30 years, for a few ticks less than what they wanted. Really, what is the big deal to an "investor"?

Example...

I buy 100,000 shares of ABC at $1.000000000000

20 years later, I sell 100,000 shares of ABC at $10.00000003

But the NBBO was $10.00000004!

OMFG! CHICKEN LITTLE! SQUAWK!
 
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Tradex said:
Care to elaborate on that please (your sentence is rather odd)?
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he's saying markets generally go up because of economic growth and devaluation of fiat currency. so over the long run, the market trends up (suggesting positive sum)

then someone else brought up transaction cost, which suggests a negative sum game because market makers profit from your bid/ask spread, and quants use their algos to cut in line of the order flow.

So who are the quants really competing with? it seems like it's really a battle among the big whales. institutions trading huge lot sizes and need good fills. quants disrupt the order flow and thus it's a war of losing less to slippage. so unless you're trading a really big account on a really small time frame, it seems like quants should be an afterthought for traders.
 
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Overnight said:
what "investor" gives a damn about their portfolio shares that they sell after 30 years
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True, but OP is talking about traders, not investors.

So if you are scalping the market 50 times a day or more these predators/thieves will eat a significant portion of your capital, each year.

Are you OK with tha
 
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Tradex said:
True, but OP is talking about traders, not investors.

So if you are scalping the market 50 times a day these predators will eat a significant portion of your capital, each year.
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My bad, I was replying to your post...

"...markets have been hijacked by high-powered interests at the expense of investors a..."

...but thought I was replying to the OP.

Shit, I am getting old, can't follow threads anymore.
 
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