Is Quantitative Analysis the only way to get an edge in the market?

SimpleMeLike said:
Hello,

Very good question.

I believe both are needed to find a trading strategy or edge. I believe a trader needs to have an idea how he/she wants to trade and use historical price data to practice that edge for simplicity and profitability.

It sounds tedious but I believe putting a few indicators on a chart and watching the price action for a few months and writing down trading ideas, then back test those trading ideas is the best way to go.

So, you want to do 2 things, 1) think of a trading idea 2) verify the trading idea. Do 1 and 2, till you find something profitable over X amount historical trades. I think this is the best route. It will give you confidence as well.

Also, I am learning to believe an edge in the market is also protecting your cash flow or capital. From my own experiences, trading paper would have prevented many unnecessary losses that I made simply cause I didn't know what I was doing. What I mean is, you can have the best trading strategy in the world, but if you have loss all your money making many many mistakes, then you can't make money with that strategy. Take your time. No rush and enjoy this.
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You may just get a row of lucky trades which "confirms" your trading idea but its not the case.
Any trading ideas should have right premises what I consider the most difficult thing as efficient market leaves tiny opportunity to discover any patterns which were not discovered by others
 
Quants with an edge implies you were a first mover pre 2004, have a few hundred million invested in inrastructure and to shape policies with insiders at the exchanges, have a staff of PHDS from top universities like MIT, and a comparable staff of lawyers.

Just because you do some programming on your trading platform is nothing special these days yet the geeks want to fantasize they are some genius quant.As usual the crowd shows up a few decades to late. Discretionary traders with a lot of experience probably have a greater edge, not in taking the spread but in making profits.
 
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comagnum said:
Discretionary traders with a lot of experience probably have a greater edge, not in taking the spread but in making profits.
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Not anywhere near microstructure. The strong/high win/low risk signals are captured by the programs, while discretionary daytraders and overnight players are left with all the risk.

The smart players are program scalpers, but not necessarily market makers. There is momentum opportunity outside the spread with a properly designed/implemented algo, and it can be done by an independent trader. Not a short road though, and full of trial and error.
 
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The smart players are program scalpers

To bad the performance data compiled of 5,000 CTA's does not support your claim unless you are talking about the real big players like Citadel or one of the larger prop firm/hedge funds. For retail scalpers approx 4% are able to eek out a living at it for more than 2 years. Most consider scalpers in general the dumb money making their brokers rich and churning their accounts quickly. Those 'smart player's/scalpers' are few and far between. Besides, In a raging bull market the smartest ones are the investors that have been riding this 8 year bull - ohh , I forgot you guys are afraid to hold overnight- to much risk for you.
 
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doggyfx said:
Any trading ideas should have right premises what I consider the most difficult thing as efficient market leaves tiny opportunity to discover any patterns which were not discovered by others
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doggyfx,

None of us knows the opportunity the markets have to offers or patterns unless we have back test the ideas.

I am not profitable trader, but for me I just program my trading ideas on NinjaTrader8, click back test and hope to see positive expectation.

I haven't got lucky and seen it yet, but I keep on trying til I find a strategy or make the current one I am programming work.

It is what it is.
 
@comagnum

Not here to argue failure rates. I always emphasize the difficulties. You have to be a quant with extensive microstructure knowledge/experience and high level of tech skill to get anywhere near a real-time execution engine.

digitalnomad, post: 4434152

"You need an edge with a defined positive expectancy, PERIOD. No ifs, ands, and buts. Both sides of expectancy need to be measured accurately. Trade win percentage and R/R are the basis for a successful daytrader. 99% of traders have no clue how to accurately define either.

If you are not a quant you have next to zero chance of making it as a daytrader. Drawdown is your enemy, and only quants have a grasp on calculating maximimum drawdown, and controlling trade size to maintain acceptable levels of drawdown.

Also, optimal profit targets cannot be assessed by stroking your pole in front of a chart. Most daytraders are lazy morons. Gather your stats, or watch the well-structured supermodels suck the money out of your pocket."
 
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digitalnomad said:
"You need an edge with a defined positive expectancy, PERIOD. No ifs, ands, and buts. Both sides of expectancy need to be measured accurately.
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digitalnomad,

Everything you said makes perfect simple sense.

Explain what you mean by "Both sides of expectancy need to be measured accurately."

Thanks
 
Well, why would anyone want to compete with the big boys? If you gonna be a quant, try to find a niche that has less institutional presence and work out some alpha there. Same goes for fundamental analysis approach - it's not likely a small trader will have an analysis/information mosaic that's better then an LS PM somewhere. But if you find a right niche, you can do very well.
comagnum said:
Quants with an edge implies you were a first mover pre 2004, have a few hundred million invested in inrastructure and to shape policies with insiders at the exchanges, have a staff of PHDS from top universities like MIT, and a comparable staff of lawyers.

Just because you do some programming on your trading platform is nothing special these days yet the geeks want to fantasize they are some genius quant.As usual the crowd shows up a few decades to late. Discretionary traders with a lot of experience probably have a greater edge, not in taking the spread but in making profits.
More...
 
digitalnomad said:
@comagnum

Not here to argue failure rates. I always emphasize the difficulties. You have to be a quant with extensive microstructure knowledge/experience and high level of tech skill to get anywhere near a real-time execution engine.

"
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BlackRock manages $5 trillions USD. They have super-fast machine learning systems and super-fast network and computing abilities. In addition, they have top talents from top schools and funds. Yet their quant trading algo was under-performed. They lost billions last year.

Not only them, much of the quant algo in the Wall Street was under-performed last year.
 
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