The New Math: Quantitative hedge funds are pressing into new realms of science

Quote from SH_DW:

I am another one of those quants that has been around for nearly 20 years! I trade Nasdaq100 futures primarily but with my intraday System have been able to gain more than 20,000 points since 2001 with <60pts maximum drawdown.. on a $10,000 account! [by the way trading no more than 3 to 5 contracts max -both long +short -NOTHING held overnight!]

I no longer manage money for others because, quite frankly, I don't need the headache of meeting all the myriad regulatory requirements. Besides, I like my privacy!

My approach is derived from thermodynamics.. create a boundary condition problem, determine key inputs/forces -the "true drivers" -acting on the environment (they are very specific but variable in magnitude). I consider rumors, news, info/reports of any type to be like a "mist" that can have an effect on the "true drivers" of a market: Buying +Selling! How the "mist" will affect the "true drivers" is UNKNOWN! As a scientist I can measure these "true drivers" and create a series of "tools" which when assembled properly can reliably predict a specific pattern consistently over time [there are many different patterns -hence multiple "Models" w/n the "System"].

Imagine a box as the MARKET with a general "mist" surrounding it. There are 2 vectors (buyers, sellers) acting on the box with 5 specific measures of these vectors: (!) Price, (2) Time, (3) a f(volume(weighted)), (4) ProprietaryA +(5) ProprietaryB.. the tools I develop are derived from these 5 measures.

I must still manage my capital properly.. for this we can turn to the methods poker players employ when they are winning vs. when they are losing. I aggressively bet when I have the best of it and pare back when losses build. Most importantly, the MARKET determines my every move.

I do not fear market turbulence.. I plan for it, expect it +THRIVE on it! This is what we do, isn't it.. we are all traders! We live on the proper MANAGEMENT OF RISK!! We must understand the methods we employ +their limitations.. otherwise any of us could fall victim to an outlier event.. a DISCONTINUITY, in the parlance of the mathematician..

Mh :cool:
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Excellent Post! I would love to hear more from other Quants on ET! QUANTS UNITE!!!!
 
Quote from SH_DW:

I am another one of those quants that has been around for nearly 20 years! I trade Nasdaq100 futures primarily but with my intraday System have been able to gain more than 20,000 points since 2001 !
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And yet you say it like we're all supposed to be impressed.

WOW!.................Well done.

Since 2001 if any of my traders were up such a small amount I 'd have got rid of them.

You should really work on that system.
 
Thank you sir!

I have been humbled. If you will, can you enlighten me on the general methods YOUR traders employ OR at least the returns +max drawdowns you WOULD consider acceptable? By the way.. what type of LEVERAGE do these traders employ to achieve, may I assume, such lofty returns on capital?

Mh
 
$preader:

When I first began this journey, I had scarcely 2 pennies to rub together. I had just been laid off from my job in yet another mass layoff of engineers at ANOTHER major corporation.. Carrier Corp & General Electric.. spending more money looking for another "salary limited" job.. ENOUGH!

I worked an overnight job 60 hrs per week then came back home to develop "systems for trading at a time [1987] when "Quant Investing" wasn't the strategy du jour. Finally I was able to assemble a small account of $1200 to "play" with. I added to it when I could. Dealing with 1 contract and having to cut short bigger wins to put cash in the account was a challenge until I could handle 2+ contracts.

It WAS difficult! There were bad periods, where losses forced me to "learn" a new concept then apply that "knowledge" to the program in development. That process continues unabated today. No longer do I use Excel exclusively or Clarity+Composer software. It is still FUN. I love what I do. I am NOT the best, however, it is a very satisfying life.

My family, wife +4 children, DO support my work and I am passing on valuable knowledge to my children who will also be required to use their own capital if they decide to follow in my footsteps. There will be no silver spoon.

I DO wish you the best in all your endeavors.. whatever your returns are. Good day sir.

Mh:cool:
 
What industry’s geniuses failing to understand is that most of their profits came from illegal gimmicks such as inside info , front running , late trading ..etc , etc
 
Quote from $preader:[concerning ''it is not their car]

Good analogy.

You could also add that when they do end up in a flaming heap,there are the other innocent drivers minding their own businesss who end up being dragged into the same fireball!

Only most of these poor bastards own their own car.
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Good analogy, on who has the title on those vehicles..

And the other side of that coin, the small bank owns 3 cars ,all 3 are for sale;
big banks,big car companys own most of those depreciating vehicles:cool:
 
Quote from SH_DW:

Thank you sir!

I have been humbled. If you will, can you enlighten me on the general methods YOUR traders employ OR at least the returns +max drawdowns you WOULD consider acceptable? By the way.. what type of LEVERAGE do these traders employ to achieve, may I assume, such lofty returns on capital?

Mh
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May I ask why you still only implement your methods in 3-5 lots?

With such consistency over time isn't it natural to increase size and hopefully therefore profits?

This is the usual pattern of profits I would expect from a talented and consistent trader and it usually blossoms over a three year period:

By the end of year 2 an average month should be what was made throughout the whole of year one.

By the end of year 3 a good day is the equivalent of an average month in year 2.
 
I have recently begun to trade the same #of contracts PER $25,000 balance in my accounts. Since I will not divulge total capital traded -an example would be that at $100,000 I would trade 4 to 20 contracts [1 to 5 c at $25,000].. it is trickier to get in and out.

I took my time in order to limit max % drawdown of capital to more manageable levels +am cautiously tackling larger size positions.

Any ideas /suggestions on how larger size might be handled best?? I have been used to getting in at the prevailing market price.. this is tougher to do effectively when trading larger positions. I prefer to execute trades when I WANT to be in or OUT, therefore, market orders seem best. I am open to other ideas!

Thank you ahead of time for any suggestions on trading larger size. It has been a good discussion overall.. good trading next week all.

Mh
 
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