Algorithmic Trading

Discussion in 'Automated Trading' started by afc, Jul 28, 2005.

  1. afc


    Anyone out there got a view on the future of the traditional trader versus say, a PHD grad who develops and maintains black boxes? Are 'traditional' traders being phased out?

    Any comments welcome

    Thank you
  2. What about a punk developing them grey boxes?

    You're welcome.
  3. FredBloggs

    FredBloggs Guest

    given that a good street fighting trader will beat the phd black box day in day out, id say no.
  4. I think traditional traders, even a barrow boy from Essex with no GCSEs can make more money than a PHD grad from Cambridge. The thing is, if you want to be a succesful doctor, or lawyer or rocket scientist, you need to be smart. But I could flip a coin right now and go long or short something, and make more money than some idiot who's been number crunching a particular stock for the past 12months. I personally think MOST professionals, be it Oxford or Cambridge grads in the City, talk a lot of rubbish anyway. And they all just go with the crowd. Daimler Chrysler come out with great earnings that surprise the market. The next day they are raised to buy by JP Morgan analysts. Oh well done boys, good tip .....

    It does help to be smart in the market, I won't lie, it does. But some of the smartest people I know have failed to make money, they may over analyse, they may lack courage. Balls. Balls are as good as a smart mind in my opnion, in the market. When you see a market aggressively shooting up, I don't have the balls to buy it as it's going up, and then it keeps going up.

    Individual black boxes might work really well, but at the end of the day, none will ever be superior to traditional traders.
  5. I believe that there is a bit of confusion when it comes to Maths/Engineering/Physics/Finance PhDs and the kind of work that they do.

    The vast majority of Quants develop, implement (i.e. code), validate, calibrate, and maintain pricing, risk, and hedging models for derivatives, sometimes rather complex derivatives - the sort of shit that make s you go grey prematurely. Have a look at some of the job adverts on Quant websites, and you'll see what the requirements are.

    Yes, there are Quants working on algorithmic trading, but a lot of the work done here is to reduce execution risk and market impact of trading strategies (i.e. for crude examples - VWAP or TWAP transactions of huge orders, etc, etc).

    Of course, there are also bots making markets and an increasing number of Quants working on fully automated trading.

    Also, think about the capital these guys are playing with, they don't exactly play with tiny half-a-mil accounts!!!

    In addition however, they have better hardware, better connections to the exchanges, better software/algorithms, and pitiful transaction costs compared to you and I.

    IMHO, traditional traders are not being phased out, but they have had to adapt. Of course, you've probably read of IBs firing huge numbers of, particularly, equities traders...

    I trade traditionally (for fun) and I autotrade SIFs. Equities, well... Markowitz would be proud :)

    Look, chill out and do as I do - just drink some Jim Beam, relax, totally groove-out to some cool tunes and trade!

    [Edit] I wonder if these "black boxes" (I really luuurve that term :) ) are made from the same highly visible material their aircraft counterparts are made. :D
  6. afc


    Thanks George for your comments. I myself am a traditional trader in the best sense of the phrase, however i do happen to think that us 'traditional' boys cant afford to be complacent or stubborn and think that these complex algorithms are not going to have a big bearing on the future of trading - they are aready having a significant impact. You can see this in most of if not all electronic markets, both mature and immature.

    We have to embrace this technology/methodology, and work with the quant guys, as in essence the theory behind trading hasn't changed dramatically - only the application has.
  7. exactly. apparently phd grads are the trading gods, unmasked.
  8. See, we're providing the liquidity for the "traditional boys" and each other. I personally think one ought to consider learning about programming, maths, and "mechanics" if a a big bag of shells is wanted... not to mention less stress and more free time.
  9. Edge_s


    Q by afc: Anyone out there got a view on the future of the traditional trader versus say, a PHD grad who develops and maintains black boxes? Are 'traditional' traders being phased out?

    Any comments welcome

    Thank you
    Answer by the Edge:

    PHDs are the way forward, I am not one of them but i am a very good programmer and mathematician and i think it helps big time...if you're too traditional you might as well apply for a job at Burger King specially if you do your nails at the office instead of doing your research...
  10. 2 words
    black swan
    #10     Jul 29, 2005