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Quantitative Trading - Recommended Books?
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Quantitative Trading - Recommended Books?

  #31 (permalink)
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ratfink View Post
@artemiso, @Limitless100

I've enjoyed your discussion and found it interesting, thanks.

A programmer I used to employ in a graphics CAD company 30 years ago became CTO for such a firm, with maybe 50 of those PhD types, more on the risk-management side but the same sort of mathematical area really.

He came over a year or two ago to see me and catch up, we had a great chat over a couple of beers and eventually I got the truth out of him - he said "you know what the scariest thing is? - they believe in what they're doing, and yet they have no idea that it bears no relation to the reality of the world or the actual risk involved.'

Great insight here. By chance I happened to be reading about LTCM's collapse earlier today, with a large emphasis on their quantitative risk-management approach. Just to clarify, your saying that your friend stated that the quants at the firm believe in what they are doing and that it works, yet in reality, it has no relation to the reality of the world/markets. Or were you saying that the quants believe in what they are doing to an extent, but they accept it truly cannot control risk or foresee unseen things in the world?

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  #32 (permalink)
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SodyTexas View Post
Yes, I have read and own it and many other books from Perry Kaufman, he is very formula driven and heavy math.. But, I think this is the type of book that you would fall in love with (like myself did). But for others reading this, its not a casual trading book and a good understanding of the markets is needed prior to reading.

As a side note, this book is also part of the curriculum for the Chartered Market Technician designation.

If you read it Limitless let me know, I would love to know your opinion.

Cheers,

Sody

Sounds great! I believe I will pick it up! Thanks for your insight.

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  #33 (permalink)
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artemiso View Post
I've always wanted to improve the world in measurable ways, and loved discovering new phenomena in the abstract (science), and loved writing fast programs. I had already been doing various combinations of 2 out of 3 of those with moderate success, which got me admitted to a competitive university.

But the first time all 3 of those converged for me was in my second year of college, when I took a scientific computing course and there was a particular recursive algorithm that had only applied to 2-dimensional problems. I saw a symmetry between that problem and something else that I was working on in my research (5-dimensional data), so I decided to extend that algorithm to n-finite dimensions and proved that the algorithm asymptotically approached the correct solution at a certain rate. (This sounds like a challenging problem but it's a typical extension in mathematics and the most challenging leap of intuition is usually in the first 1 to 5 dimensions, so the difficult part of the problem was already solved for me, in my view.)

You can call that my first love. But there was something incomplete about that first love: The hardest part is to make a scientific/mathematical discovery that improves the lives of others significantly, because often, only a handful of people actually care that you solved a difficult conjecture in mathematics, regardless of its applications. It's not recognition that I was looking for, but I just wanted to solve a "bigger" problem in the worldly sense of it.

The second time all 3 of those conditions converged for me was in finance, but this time, I loved it entirely and was ready to commit my life to it, because I'm improving the world in more far-reaching ways than I had ever expected to with my obscure skills. The type of trading I'm doing is like inventing the mobile phone - it's not as grand as curing cancer, I'm not going to receive much recognition for it, but it is actually more useful than curing cancer.

Thanks for sharing this Artemiso, it's always great to hear that someone is pursuing a path in which they have true passion and love for, nothing is better than that. I feel that when you have a passion for something, you work toward becoming great at it. When you work towards being great, and occasionally discover (even minor) justification for what you are working towards, it is a feeling of enlightenment, or epiphany. Without following a path that you truly love, it would not be possible to experience these feelings repeatedly. Further, when you reach these various vindications of your desires, it pushes you further and further wanting to discover more and more. Most importantly, when you fall flat on your face from time to time, you have the will to get back up and keep going, opposed to giving up and looking for something else.

Thanks again for sharing.




Well, I mean no offense to your friend - but this exemplifies why I don't like employing programmers for the research/trading role regardless of their mathematical skills, because they are often trained to only know what's right/wrong based on what they see and trial-and-error (debugging a program until it runs).

How do you know that your theory is an accurate representation of reality if it involves the interactions of electrons, or electromagnetic waves, that are not visible to the human eye or any man-made microscope? Well, in fact we do know numbers down to as fine as 0.25 parts of a billion. (Fine-structure constant - Wikipedia, the free encyclopedia) When you receive an x-ray scan, you stake your life on the accuracy and precision of these numbers.

As far as I'm concerned, finance is easier than physics; it's much easier to envision the relations to "the reality of the world" or "the actual risk" involved when you don't have to take abstract leaps of faith.

I bolded a very important part. This is absolutely true, and part of the reason as to why I stated earlier that simply falling in the 99.999 percentile in some type of mathematic/physic based subject is not enough to grant you with instant success over everyone else. You need to have the right type of mind to take advantage and correctly implement it, OR, be working with someone who has the right mind!

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  #34 (permalink)
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Limitless100 View Post
Great insight here. By chance I happened to be reading about LTCM's collapse earlier today, with a large emphasis on their quantitative risk-management approach. Just to clarify, your saying that your friend stated that the quants at the firm believe in what they are doing and that it works, yet in reality, it has no relation to the reality of the world/markets. Or were you saying that the quants believe in what they are doing to an extent, but they accept it truly cannot control risk or foresee unseen things in the world?

Thanks. They thought their maths trumped reality - and we both know how that turned out ... different firms but same delusions.

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  #35 (permalink)
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Both books by Euan Sinclair and Ernie Chan would be good to start with.

Past that you probably want to get some exposure to probability and time series analysis.

Probability wise my fav is Kolmogorov's chapter in Mathematics: Its Content, Methods and Meaning. That is just as good as it gets.

Time series analysis, pick a programming language and get to work analyzing.

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  #36 (permalink)
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ratfink View Post
Thanks. They thought their maths trumped reality - and we both know how that turned out ... different firms but same delusions.

Absolutely. Mathematics is a beautiful thing due to the definitive answer it can provide. But when you are attempting to predict something that hasn't happened yet, with information that is not fully known, you simply can't say with complete confidence that your models will hold true.


NoiseTrader716 View Post
Both books by Euan Sinclair and Ernie Chan would be good to start with.

Past that you probably want to get some exposure to probability and time series analysis.

Probability wise my fav is Kolmogorov's chapter in Mathematics: Its Content, Methods and Meaning. That is just as good as it gets.

Time series analysis, pick a programming language and get to work analyzing.

Which books are you referring to specifically? I will look them up.

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  #37 (permalink)
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Option Trading: Pricing and Volatility Strategies and Techniques
Volatility Trading
Algorithmic Trading: Winning Strategies and Their Rationale
Quantitative Trading: How to Build Your Own Algorithmic Trading Business

I loved this blog when it was active
Tr8dr | Systematic Models & Strategies

There are a bunch of Richard Hamming lectures on youtube that are fantastic although not specific to finance.
https://www.youtube.com/watch?v=YF2wOE66gfw

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  #38 (permalink)
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NoiseTrader716 View Post
Option Trading: Pricing and Volatility Strategies and Techniques
Volatility Trading
Algorithmic Trading: Winning Strategies and Their Rationale
Quantitative Trading: How to Build Your Own Algorithmic Trading Business

I loved this blog when it was active
Tr8dr | Systematic Models & Strategies

There are a bunch of Richard Hamming lectures on youtube that are fantastic although not specific to finance.
https://www.youtube.com/watch?v=YF2wOE66gfw

Thanks! I'll take a look

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  #39 (permalink)
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Hey everyone,

I believe I will be going with
Trading Systems and Methods, + Website by Perry J. Kaufman

Based off of the remarks by @sodytaxas and various reviews online it seems to be a strong book.
The book seems to be based off of trade station coding / metastock. I will not be working with either of those platforms/languages, but instead, C++.

I contacted the author and he seemed to be very helpful in translating from the given examples (tradestation/metastock) to C++ code.

Can anyone else confirm what he is saying? Specifically SodyTexas, could you make use of the given examples even though you may have been using a different platform?

If anyone knows any other books of this nature please feel free to continue mentioning them.

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  #40 (permalink)
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I don't see any issue at all. After All, Tradestation & Metastock language is called easy language because its meant to be easy. once you get past some of the nuances of the language the logic is easily understood.

My suggestion though is to avoid C++ like the bubonic plague. It is such a old language now, and it will rely on heavy coding that most languages have simple solutions for. If you know C++ try out C#, it plays so much nicer with .Net and Java.

What platform are you using? Or did you make your own?

Also, if you are really serious about being a quant download R (free) or buy Matlab. They will become your best friend. Ninjatrader is my platform of choice, with CQG or Continuum data. Don't be fooled by its name, it is a professional system (not friendly with options or spread trading) ; but, robust with its flexibility to code in it. Plus there is no API issues that you have to mess with, Ninjatrader handles all the API depending on the broker you are using. All you have to do is code..

Cheers,

SodyTexas

"The great Traders have always been humbled by the market early on in their careers creating a deep respect for the market. Until one has this respect indelibly engraved in their makeup, the concept of money management and discipline will never be treated seriously."
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