My own account, but I am feeling the itch to form a hedge fund. Recommended brokers? Well as a retail trader you can't go wrong in the US with: Interactive Brokers FXCM ThinkOrSwim Outside the US, the opportunities explode especially in FOREX.
Equities: So much noise. The quantitative stuff seems not to work as well, at least not for me. Can be moved easily by too many subjective factors adding huge amounts of noise and risk. Strictly an intra-day business. The rest is because they can be traded on many time frames without huge fear. ========================================================== Currencies: Very amenable to quantitative analysis. Much less noise, far harder to manipulate. IRs: Pure logic, and an extension of currencies, or is the other way around? Very amenable to quantitative analysis, and almost impossible to manipulate as long as you stay away from LIBOR. Options: Probably the most amenable to quantitative analysis. Esoteric Markets: Absolutely, but I think you have to be an institution for that. But this the "Go west young man" of markets VIX
@nitro Awesome. Thank you for the info. I forgot about VIX it's defintely on my list to throw into the mix and analyse - volatility is definitely an asset class. In terms of currencies would you prefer FX futures or would you prefer spot FX? Do you take execution costs and risks into consideration when analysing certain assets? For example, do you specifically exclude instruments where the individual bid / ask spread (or transaction cost) of the leg makes it prohibitively expensive to trade?
I am currently with Interactive Brokers, but I don't see how I can get the tick by tick data you talk about through them. My internet connection is probably too slow, or I must subscribe to too many tickers.
Volatility is often mispriced, particularly in equity markets. http://www.cnbc.com/2015/12/10/how-goldman-made-65-on-chipotle.html
@nitro Interesting - I haven't really looked at options and have never included them in my direction-less analysis (yet!). I assume you analyse and trade equity option spreads?
I don't currently trade options. I have extensively in the past, trading some very interesting strategies.
Here is a very interesting article on micro services. This is the way I go about designing some of my applications these days: http://martinfowler.com/articles/microservices.html#OrganizedAroundBusinessCapabilities
Here are examples of how professionals put on huge relative value spreads to make colossal amounts of money, while keeping risk in check: Shifting Term Structure In Oil - What It Means Apr. 13, 2015 6:12 AM ET | 9 comments | Includes: BNO, DBE, DBO, DIG, DNO, DTO, DUG, DWTI, ERX, ERY, GASL, GRN, IYE, JJE, KOLD, OIL, OLEM, OLO, RJN, SCO, SZO, TWTI, UBN, UCO, UGA, UHN, UNL, USL, USO, UWTI Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...) Summary A shift in term structure told us prices were heading lower late last summer. A big contango pressured prices. Lately contango is narrowing. What does the current state of front to backs mean for oil now? Term structure in commodity markets provides some of the best clues as to whether a market is in a deficit or a surplus. As I grew up at one of the world's leading commodity trading companies in the 1980s, the chief copper trader was a man named Manfred Koppelman. He was a no-BS kind of guy. In the years before ramped-up regulation, Manfred was an expert at "tampering with the mechanism" of the copper market - that is a quote directly from Mr. Koppelman himself. Manfred used the capital at his disposal to buy up copper inventories and influence term structure in copper - this put him in a position where he could dictate whether the copper market was in backwardation or contango. When it comes to term structure, backwardation is a market condition where deferred prices are lower than nearby prices, indicating a tightness or supply deficit. Contango, a market condition where deferred prices are higher than nearby prices, indicates that a market is either in equilibrium (supply and demand are balanced) or a glut or oversupply exists. In any case, Manfred was a master at tampering with the market mechanism in copper. Today, regulators would have big problems with the types of trades that he did, which incidentally made tens if not hundreds of millions in profits for the company over time. In the early 1990s, my boss was the world-famous oil trader, Andy Hall. He took my education in market term structure to another level. While many believe that Mr. Hall makes tons of money being long or short crude oil that is not necessarily the case. He is a master at understanding, interpreting and positioning using term structure in crude oil markets. In 1991, Hall made over $400 million the night that Iraq invaded Kuwait. He was long nearby crude oil contracts and short deferred contracts. When the price of nearby crude oil doubled overnight in August of 1991 - the price of deferred crude oil actually stayed the same or moved lower. Hall called these types of trades "front to backs." That front to back trade in 1991 resulted in him ringing the cash register big time. When it comes to the oil market, term structure or front to back spreads offer some of the best clues as to the future direction of nominal price. They enable one to feel the pulse of the supply and demand picture in oil, or any commodity for that matter. A shift in term structure told us prices were heading lower late last summer When the active month NYMEX crude oil futures contract began heading lower from its peak in June 2014, the plunge in price over a six-month period caught many off guard. Very few market participants, including the expert analysts, could even imagine that the price of the most liquid commodity in the world would halve over a period of six months. However, those who understand and follow term structure in the oil market recognized the warning signs. As the daily chart of the May 2015 versus May 2016 crude oil spread illustrates, the price relationship between these two futures contracts changed dramatically during the late summer of 2014. Crude oil on the New York Mercantile exchange had been trading in a backwardation - deferred prices were lower than nearby prices. The May 2015-May 2016 spread traded at a $6.81 backwardation (May 2016 lower than May 2015) in June of 2014. The differential between the active month contract relative to the price one year hence was even more dramatic. Last August, the level of the spread broke through resistance on the charts at just under the $4 backwardation level. Then in October, the relationship moved into contango for the first time. Deferred prices moved higher than nearby prices. This represented a massive change in market structure. We all know what followed - the nearby price of crude oil tanked. By January 2015, it was below $50 per barrel, quite a move considering nearby NYMEX crude was north of $107 in June. A big contango pressured prices As the contango in NYMEX crude oil increased during the fall of 2014 and winter of 2015, the price of physical crude and nearby futures contracts plunged. When it comes to term structure, contango peaked on March 18, 2015, when May 2016 NYMEX crude traded at a $10.87 premium to nearby May 2015 crude futures. This represented a contango of around 25% based on the May 2015 price at the highs. This huge contango presented an opportunity for crude oil traders who could take physical delivery of oil and store it. So long as they had the ability to do this and finance the transaction for total costs of below 25% - the differential became pure profit. Not to mention that those entering into these transactions also get a free call option on any tightness in crude oil market structure during the term of the trade. That is why oil storage filled up quickly and became scarce. It is also why owners of storage facilities and shippers began hiking storage rates for crude. There are many winners in the crude oil patch given the huge contango. However, the ever-increasing contango between last summer and mid-March 2015 was a signal that there was too much oil inventory and production. The huge contango continued to signal that prices would move lower. Lately contango is narrowing Over the past six weeks, an interesting thing has happened in terms of the contango in crude oil. While bearish sentiment continues to hang over the oil market, term structure has begun to change. As the chart highlights, the contango in May 2015 versus May 2016 NYMEX crude has dropped from $10.87 to lows of $6.12 on April 7 - it closed on Friday, April 10 at $7.84. The one-year NYMEX crude oil spread dropped from a contango of over 25% to around 15% over the span of 6 weeks. Accompanying the narrowing contango has been a market that is trading in a range of roughly $45 to $55 per barrel with the pivot point at $50. Active month May crude oil closed on Friday, April 10 at $51.64 per barrel. Rising storage rates and facilities at near capacity levels should be forcing contangos higher but it is not. The recent fall in contango could be the result of falling rig counts in the U.S. Although U. S. production of crude remains high, there should be a lagged effect with the falling number of rigs curtailing some production in the months ahead. The bottom line is that the price of crude oil seems to have stabilized and term structure is validating the current price at around the $50 per barrel level. What does the current state of front to backs mean for oil now? The narrowing contango in crude oil could be the result of a number of factors. It could be a signal that crude oil prices have bottomed. It could also be a signal that the oil market is shifting focus from fundamental and technical factors to geopolitical issues that always present the potential for volatility. The status of the deal with Iran remains uncertain given recent rhetoric on both sides. The war in Yemen amounts to a proxy war between the Saudis and their coalition partners and Iran by virtue of their support for Shiite rebels who deposed the Yemeni government. The long border between Yemen and Saudi Arabia presents potential issues for Saudi oil production if the war spreads beyond Yemen's borders and into Saudi Arabia. Add to that the high open interest, the total number of open positions on NYMEX crude oil futures contracts, at over 1.71 million contracts as of April 10. There are still many short speculative positions out there in the crude oil futures market. If things get out of hand in the Middle East, short covering could lift prices - just as they did way back in August of 1991. One thing about commodity markets is that history tends to repeat itself. For now, the current state of term structure in the crude oil market has become less bearish as contangos may have peaked. Keep your eyes on term structure in crude. The fact that many of the top market traders over history not only watch this market dynamic but also trade it validates that it presents amazing clues as to the future direction of nominal price. http://seekingalpha.com/article/3064466-shifting-term-structure-in-oil-what-it-means?page=2
Study This is one place where Matlab is great: http://www.mathworks.com/matlabcentral/fileexchange/?term="particle+filter"