Nooby McNoob becomes a quant

[nooby_mcnoob]

-- do you know what products and what time frames are your going to target in your strategy?
-- would you rather run a single "perfect" strategy or run a diversified portfolio of strategies?
-- what, in your opinion, in your setup (from asset selection to execution) gives you an advantage over other market players?

1) index tracking ETFs on a minute to hour minute time frame to start.

2) my life experience tells me to do one thing and do it well. But that being the case, strategies often stop working which is why quants remain employed. So I would say my goal would be to focus primarily on one strategy to start and see how well I manage but expect that one day the strategy will stop working for whatever reason.

3) My advantage as I see it is I'm willing to wait for good setups. I can bide my time and avoid going in when I have less than (imaginary) 80% certainty. I am also technically inclined both when it comes to mathematics and statistics as well as programming. I learn quickly and have no reaction to stress. What should I lose or add here?

 

[sle]

2) my life experience tells me to do one thing and do it well. But that being the case, strategies often stop working which is why quants remain employed. So I would say my goal would be to focus primarily on one strategy to start and see how well I manage but expect that one day the strategy will stop working for whatever reason.

There is no right or wrong answer here, it's more of a phylosophical approach to life. The advantages of a single strategy are that you know it well, understand the source of alpha and can keep tweaking through it's life cycle. The disadvantage of a single strategy is that you hit a law of diminishing returns as you make incremental improvements - i.e. it's probably easier to add another de-correlated strategy then to make improvements to an existing strategy with the same impact on the portfolio performance metrics. The disadvantage of a portfolio of multiple strategies is primarily organizational (keeping up multiple code bases, multiple sets of performance metrics, allocating capital to each strategy etc).

3) My advantage as I see it is I'm willing to wait for good setups. I can bide my time and avoid going in when I have less than (imaginary) 80% certainty. I am also technically inclined both when it comes to mathematics and statistics as well as programming. I learn quickly and have no reaction to stress. What should I lose or add here?

I guess my question was not clear. Why do you think your personal source of alpha is not tapped out by other market players?

 

[newwurldmn]

There is no right or wrong answer here, it's more of a phylosophical approach to life. The advantages of a single strategy are that you know it well, understand the source of alpha and can keep tweaking through it's life cycle. The disadvantage of a single strategy is that you hit a law of diminishing returns as you make incremental improvements - i.e. it's probably easier to add another de-correlated strategy then to make improvements to an existing strategy with the same impact on the portfolio performance metrics. The disadvantage of a portfolio of multiple strategies is primarily organizational (keeping up multiple code bases, multiple sets of performance metrics, allocating capital to each strategy etc).


I guess my question was not clear. Why do you think your personal source of alpha is not tapped out by other market players?

The other disadvantage to specialization is that you run more risk of being obsoleted by changing secular or regulatory market conditions.

 

[nooby_mcnoob]

There is no right or wrong answer here, it's more of a phylosophical approach to life. The advantages of a single strategy are that you know it well, understand the source of alpha and can keep tweaking through it's life cycle. The disadvantage of a single strategy is that you hit a law of diminishing returns as you make incremental improvements - i.e. it's probably easier to add another de-correlated strategy then to make improvements to an existing strategy with the same impact on the portfolio performance metrics. The disadvantage of a portfolio of multiple strategies is primarily organizational (keeping up multiple code bases, multiple sets of performance metrics, allocating capital to each strategy etc).

I guess my question was not clear. Why do you think your personal source of alpha is not tapped out by other market players?

Totally valid points and I have considered them all. At the moment, I'd love to get the point of diminishing returns with one strategy to start.

As to why my personal source of alpha is not tapped out... I haven't found it yet, so I can't tell you. This is a learning process, but I believe there are always simple sources of alpha to be found.

 

[sle]

This is a learning process, but I believe there are always simple sources of alpha to be found.

Well, source of alpha is usually straightforward, but extracting that alpha might be a difficult process

Are you working on this full time or you are part-timing while doing something else?

 

[nooby_mcnoob]

You're right, of course! I will be doing this part-time for a few months after which I hope to do this full-time.

 

[sle]

You're right, of course! I will be doing this part-time for a few months after which I hope to do this full-time.

My advice would be to find some capacity constrained strategy so you are not competing with the big boys. Something not en vogue due to liquidity or possible regulatory issues.

 

[algofy]

My advice would be to find some capacity constrained strategy so you are not competing with the big boys. Something not en vogue due to liquidity or possible regulatory issues.

capacity constrained strat? What is that?

 

[volpri]

capacity constrained strat? What is that?

i guess it means you have a strategy that is somehow constrained by your capacity?? Why can't folks talk in colloquial terms???

 

[O(1)]

I took it as.. non-scalable strategies