There are risk quants. They analyze risk. It's anything but simple. There are quant developers - they build pricing and analytical tools. And there are trading quants; a trading quant either trades a quant system or is just a trader (or, more precisely, a portfolio manager) who uses quantitative analysis extensively. But, quants can use fundamental input just as well. Contrary to popular belief, the use of quantitative techniques do not mean that you don't read "market sentiments" or "fundamentals". In fact, at certain level they all converge. There are dedicated quants and there are guys who simply have a quantitative background. Money. The answer is money. And lots of it. For what I do, there are maybe 8 dealers who overall makes up 80% of the volume. I (or any non-trivial player in this space) know them all (as in, personally. As in pick up the phone and get them on the line). We also know the investers/players in each part of the capital structure. We know their motivations (believe me, insurance companies are motivated by very different things compared to a hedge fund), what drives their decisions, and where their pain points are. You want to talk about market sentiment - this is market sentiment. Calculus may suck for you, but after awhile, it's second nature. The complexity may befuddle you (hell, I got 125 deltas, a theta, 125x125 gammas, and a few other greeks for just ONE instrument that I trade), but rest assured there's a lot of money to be made by.
if you work at a bank you will find that the more complicated the structures the more money you make. they are similar to parlays, trifectas, and teasers from an overound perspective.
Well good for all of you who can trade those complex products but I know I sure couldn't. Raw materials is what I trade best and can understand. A guy like me would have absolutely no use for a quant but i guess you guys can make good use of them. We all do what works best for us.
QuantPlus, While the bulk of your post is worthwhile, especially the part about this forum containing worthless/damaging information, this last section is fiction, and, hypocritical on your part - you are providing a damaging bias to newbies who know less than nothing. There are LOTS of good directional trading strategies out there, however, time, focused research and discipline is required to find and trade them. Market neutral hedging is not an end all nor does it *generally* outperform a sound directional strategy. In fact, several large market neutral funds got absolutely crsuhed during last months high vola. I can make an argument that the downside to a market neutral stragtegy is greater than that of a directional strategy due to unexpected periods of anti/low-correllation between the position and the hedge. How do you incorporate these "black swan" type events into a hedging algorithm/model? Most market neutral funds DON'T, that's part of the problem. Dynamic hedging models are *very* limited in many aspects, as are directional strategies, but for different reasons. For you to completely dismiss one versus the other using a silly generalization like "... unless you are an insider" is amatuerish at best. Don't take this personally either, I just want to make the point that you provided an opinion that is not fact, just opinion. Mike
Time, focused research and discipline? That is alright before the trade is entered, but how does it help afterwards? Point us at one good directional trading strategy.
To your first part: It's part of a comprehensive methodology, i.e. a combination of position sizing, market dynamic and risk assessment. If you have insecurities about how to manage a trade after you enter then you have a lot of learning to do. In general, your question is vague and uniformed. To your second part: Why would I want to do that? I have two pieces of advice for you: 1. Do your own homework. 2. A follow up to point one - asking people on this forum to reveal their trading method is like asking a man on the street if they have any spare change. Do your begging elsewhere. Mike
Ha, ha ha. I wasn\'t expecting a trading method. Just wanted to confirm that you had none on offer, i.e., your claim that there are trading methods wouldn\'t be backed up.
You've confirmed nothing and your attitude speaks volumes. Pull the head out of the arse... Again, what exactly were you expecting? If you had any experience whatsoever you'd know that developing a successful strategy of any kind (vola based, direction based, etc, etc...) is a function of the trader him/herself, i.e. the comprehensive knowledge and experience that the trader can effectively execute in terms of risk and profit over time. That's why buying systems and following signals do not work - they attempt to take the trader out of the equation. If I told you that there exists a certain market scenario, such as the one on 9/10, that can be used fairly reliably to trade direction, of what benefit would that be to you? Without discipline, you'd lose your shirt trading it.... Without patience you'd find a way to get shaken out during a pull-back or blow your entire size on the entry and then stop out before the trade has a chance to work... Without proper position sizing (mainly as a function of your own risk tolerance) you'd get scared holding overnight as well... the list goes on and on of what an inexperienced trader will do wrong given a good trade. The point being even if I gave you something that worked 60% of the time with a 5-1 risk to reward, you'd still fuck it up unless you were a good trader already. Mike