i am involved with a group of traders who are mostly quants or "counters" as they like to be called. it has been my experience that a combination of quant techniques and visual or technical displays of price ( when viewed with full knowledge of deceptions) is the best way to frame the market. best, surfer
Edward Thorp was the pioneer quant trader, started in the early 1960's by writing the classic 'Beat the Dealer'. If you do a search you will find my gems on quant trading. Quant trading I find is not easy to do, you need to put together a team of people to hash things out and would typically require a large capital base.
...realize that the market exhibits subtle structural regularities which can be discovered by statistical analysis and used as a razor thin edge to make money. Also that the vast majority of assertions about TA are ad hoc and unvalidated by backtesting.
LTCM followed the quant approach. Jesse Livermore followed the technical approach. You know how it ended in both cases. Jim Simons is currently the quant example and Paul Tudor Jones follows the discretionary approach. And then there is a quant who blew up big time Niederhoffer. There are many successful commodity traders who are technical traders. So to play one against the other is not much of use. You can make money using both approach.
...not to put too fine a point on it, but have you read "When Genius Failed" re LTCM? Their problem was not that they were quants, but that they were STUPID ARROGANT quants. They made overleveraged highly correlated statistically overoptimistic trades in illiquid market instruments.
That is exactly true of the other technical trader I mentioned. As well as the other quant Niderhofer. So ultimately the trading method + trader that equation matters is my point. (I have read that book)
...geat reading, huh? I couldn't put it down. What a genre - the financial mystery! Now if only they'd been screwing the secretaries, we could have had a financial mystery romance! You read Taleb's Fooled by Randomness? Know anything else good in that cautionary genre? Thanks. - Mike
Really!! Didn't Long Term Capical Research, quants, lose so much $ they had to be bailed out by Greenspan?? They lost so much that they may have put back more than all the quants ever made.
That was sort of answered in hypostomus's post above. As they pointed out a lot of the quantative strategies capture "razor thin" edges (inefficiencies) in markets. Therefore they leverage the strategies up because the profit potential per trade might be very small on a percentage basis. It is that leverage or over use of it as hypostomus pointed out that can get them into trouble. I feel pretty certain that for every quant that has "lost it all" at least 1000, technical traders must blow up most of whom will have never backtested anything at all but still swear that some head and shoulder 3 budda pattern must work because they saw it in a book somewhere. Did LTCM's positions really lose that much when it was all said and done. I also read the book, but I thought I read somewhere that most of the positions were eventually unwound at breakeven or better. (many of trades seemed to be standard deviation type trades where statistically speaking if you hadn't have put the damn thing on at an earlier std. deviation, multiple, whatever, you would have been happy to put it on right when your forced to take it off becaused you were leveraged to the hilt. :eek: Anyone know what happend to most of the positions that were assumed by the consortium that bailed them out?
Those guys all had PhD's, so I don't think the word stupid applies here at all. So quants are really smart and they know how to trade but they lost the most money of anybody, ever. Is that what you are saying? Ok, I guess you must be right. I will pursue quant type analysis immediately. Boy, I can hardly wait to see that money come rolling in.