Mathematics skills for discretionary trading.

You just need enough math to be able to add up your losses everyday, because unless you are a economic savant and watch the world markets 24 hours a day only then to have to parse micro data from the markets you trade you will lose with a discretionary account.

Right now I am earning my MBA and an MS in Economics (which I am almost finished with both) and I have the luxury (academic necessity) of being able to watch the markets everyday and do all types of scenario analysis because I am too poor to trade right now. I just wont risk the meager finances that I acquire every month to support my VERY large family. And if I have learned one thing during this tenure,...is that unless you build an edge using some sort of 'system/habits' you better be really good and lucky or your gonna lose.....

And the fact that you asked this question...I hope you are lucky cuz you don't sound.....
 
Quote from Rearden Metal:

My trading career is 9 years old, and I've yet to make use of any math beyond grade school level.
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i'd have to agree with this. the main math skills i use are addition and subtraction. you can pretty much cover any multiplication needs if you're good at addition . . .
 
Quote from gotmessner:

Hey,


I'd like to know your thoughts in regards to the maths skills in trading.

For example, there are a number of books by companies such as 'Schaums' which are on subjects such as Calculus, statistics etc.

I was wondering, which maths-subjects are most useful for trading?

Thanks.
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Did you finish the eighth grade? Yes? Then you qualify in math.
 
Quote from Rearden Metal:

My trading career is 9 years old, and I've yet to make use of any math beyond grade school level. Sure, MIT quants can be successful in the markets, but most successful traders I know have no need for Algebra, let alone calculus in their trading.
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MIT quants?
Their grandfather, Norbert Wiener, is said to have tried but lost quite some money.
 
Math's importance as a skill depends on what you're trading and what type of trader. If you're a scalper, you don't need much math skills beyond arithmetic.

But if you are trading structured credit derivatives on a desk in a bank, you better know your math. Those people can calculate swap payoffs in their head. That's where the quants come in. and I'm sick of hearing can't take the corporate stuff BS, how good it is to work for your own BS. With bonuses in multimillion dollars, who gives a flying 747 f? Work for 10 years and go fishing!

 
Quote from gotmessner:

Hey,


I'd like to know your thoughts in regards to the maths skills in trading.

For example, there are a number of books by companies such as 'Schaums' which are on subjects such as Calculus, statistics etc.

I was wondering, which maths-subjects are most useful for trading?

Thanks.
More...


Although we're all playing in the Major league, the level of mathematics you need to learn depends on wether you want to play at the major league level, the minor league level or the local neighborhood league level.

At the major league level, you're up against some of the toughest, brightest and skillful players who have access to vast intellectual and monetary resources. They subject each system they trade to continuous rigorous mathematical testing. The level of mathematics used is most often graduate level, eg. do you know how to derive the Kelly formula to optimize your bet size for each trade? If you're able to hang with the players in this league, you stand to make 10's to 100's of millions a year.

In the minor league level, you don't need to know how the Kelly formula is derived, all you need to know is how to apply it. Some under-grad knowledge in Statistics, algebra, arithmetic is sufficient. It's like driving a vehicle, you don't need to know how the engine works for you to be able to drive. Suffice it to say, at this level you will never make 10's of millions, let alone 100's of millions. But it's better than going to college for 15 years to make a doctors salary.

In the neighborhood league, all you need to know is the most rudimentary arithmetics. However you will need to know how to press the correct calculator keys. You can subscribe to various "market newsletters" to formulate your trades and find new trading ideas. For those able to survive a few years playing at this level, they're usually able to make enough to get by. The hours are great, you own your own business and don't need any employees.
 
Quote from mhashe:

Although we're all playing in the Major league, the level of mathematics you need to learn depends on wether you want to play at the major league level, the minor league level or the local neighborhood league level.

At the major league level, you're up against some of the toughest, brightest and skillful players who have access to vast intellectual and monetary resources. They subject each system they trade to continuous rigorous mathematical testing. The level of mathematics used is most often graduate level, eg. do you know how to derive the Kelly formula to optimize your bet size for each trade? If you're able to hang with the players in this league, you stand to make 10's to 100's of millions a year.

In the minor league level, you don't need to know how the Kelly formula is derived, all you need to know is how to apply it. Some under-grad knowledge in Statistics, algebra, arithmetic is sufficient. It's like driving a vehicle, you don't need to know how the engine works for you to be able to drive. Suffice it to say, at this level you will never make 10's of millions, let alone 100's of millions. But it's better than going to college for 15 years to make a doctors salary.

In the neighborhood league, all you need to know is the most rudimentary arithmetics. However you will need to know how to press the correct calculator keys. You can subscribe to various "market newsletters" to formulate your trades and find new trading ideas. For those able to survive a few years playing at this level, they're usually able to make enough to get by. The hours are great, you own your own business and don't need any employees.
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freaking awesome... couldn't say it better myself. :D
 
Nicholaf

You dont know what you are talking about and it shows in the immaturity of your posts. Working on a cr derivs desk is about the best money for hours job on Wall Street - everyone wants to do those jobs. Try M&A - it is a very hard job and all the people I used to work with agreed. Without huge pay they wouldnt do it as it can be very painful - no life. Try working till 2am on Friday night, in again 7am Saturday morning, work until midnight Saturday night, then again on Sunday. Have done that over and over and over. Thrilling for a year or two, then it gets old. You wake up one day and realise you are two years older and have kind of lost those years, and the pay wasnt that great and NY is expensive.
 
hey NZ, this isn't about M&A. we're talking about sales and trading in an i-bank. M&A and i-banking are the worst hours for the money, and we both know it.

even first year our of college traders get to the office 2 hours before market open and 2 hours after. those are not bad hours. true, there are jobs with better hours, but for the bonus, who gives?

i mean even for M&A, if you're good, by the third year, if you're not kicked out, you become a third year analyst, you'd be making at least 150K. if you're good, you become associate and make at least 200K.

the bottom line in regards to math skills is it depends on the league you are playing in.

 
there are a few different points of view expressed in this thread...the consensus seems to be that higher math skills are not a necessity.

To the orginal poster: Just to play the devil's advocate....you can see most indipendent traders are not using math past basic arithmatic to trade.....so perhaps you can add that piece of info about your fellow traders when helping develope your edge.
 
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