I don't know. It's an open research problem I'm working on, and have a journal for. I post on ET hoping someone will tell me I'm horribly wrong every now and then so I can go revisit what I've looked over, but so far people seem to agree. For example, I was looking at a stat arb strategy based on a well-known relationship at the 5minute interval, and the market only gave me 7 opportunities in a year for an average profit of $25. Hardly enough for a living. But when I took that strategy into higher frequencies, I saw more opportunities -- a lot more. But where the opportunities started is where the retail trader starts becoming uncompetitive. It's a pyramid structure in the trading world. The trader PnL thread is kind of a gold mine, in a sense, in that the blotters people post give (indirectly) information about what works. ET is -the- forum for finding what's going on the retail trader's mind.
Like some one said earlier, study hard core CS, physics or math at the Phd level just to get a quant job is risky. I know of pple with a Bachelor's doing stat arb day in day out. You can try ur hand at the smaller outfits that pay less well in terms of base salary. The bonus makes up for the rest. They are less competitive and more receptive of people with the less education but more of the right mindset towards trading, such as the ability to take calculated risks and being a team player.
That era was an important one in terms of the stategies and how the final fallout occurred. You can see by the exquisite example provided (of using a 5 minute chart and doing 7 trades a year to make 25 bucks) is what comes out of this pipeline of the financial industry. A person can go through training and apply the training under the constraints of the business. Here in this thread you are interested in investing in yourself to be prepared to do tasks in a business sector. Unfortunately the financial industry can't make use of trained talented people; they simply have not come to understand how to task the opportunity. Have you examined why the contributors to this thread have no understanding of the market's offer? Why the financial industry is not focussed on the opportunity that markets represent? Try to read some of the books by the people who went in one door and out the other. It is probably safe to assume some of these people are intelligent but what is going on in their collective heads that prevent them from getting any understandings? If I were to hire a person, I would do two things: task him and pay for him. Using 400,000 as his cost, then I just trade (I'll use a 5 min chart and 100 milliseconds as dimensions) 10 contracts daily of ES to make the 400,000 annual cost. (8,000 a week). Wouldn't any retail person just skip the education and just trade 50 contracts daily and let it go at that? The retail profitable strategy deals with 10 contracts at 500 dollars margin per contract or tying up 5K per employee. The daily take is 1600 bucks or 32 points for 10 contracts or 3.2 points per contract. The daily opening range is a multiple of 3,2 points. Do you think a PhD or MS or BS in anything could design an algorithm to trade the market until 3,2 points net is reached every day? This is, at best a local commuity college problem or a junior high school problem. So lets say an educated person is being hired and paid four times the 400K. It is still just a 20K capitalization problem using the same 3.2 points per day collected from the opening range in so many minutes. I attached an example at this level of margin. The time in the market covers about 9 days salary @ 4 x 400K per annum. The quant era is over, I would say.
Phd from top tier school never had a gf take a shower once a week drink lots of soda never been to a strip club. still play dungeons and dragons
Just a word of warning, a lot of shops who attempt to staff positions such as below a) simply try to harvest existing strategies brought in by new hires or b) already have all set up in-house and you will be a button pusher or IT coding slave. Nowadays even the smalles "market making" firms take the audacious freedom to request ONLY the brightest, ONLY the most educated, ONLY the best ;-) its a sellers market (job wise) so you may come across a lot of funny things. Fact is most shops, even the largest ones lost tons with low latency and stat arb strategies last year. Those who believe machines will replace humans in trading really lack a thorough understanding of the complexities of financial markets and asset pricing. While some are experts on low latency and other extremely short term trading strategies (I am not) take my word for it or ask other guys working in the industry, fact is, the big dough is still made by trades put on by human minds and not some machine, trading in and out in split seconds. You can already see how the margins of many low latency groups are getting ever smaller precisely because you now have some bots battling it out and taking each others' butter. But if that is what you wanna get into then I believe you do not need an advanced degree. If you can bring to the table ideas and interesting trading strategies that others have overlooked you maybe have a distinct advantage. I would still argue you should also look into derivatives/exotic trading positions. The harder something becomes to hedge/price the more people are willing to pay in spread. But fact is those two areas are completely opposing and uncorrelated.
Hi, In an effort to turn the thread from the good ole love-jack hate-jack quarrel, let's add a bit of content. I've found a few articles by advancetrading magazine that deal with the top quant school programs from the street's perspective. http://www.advancedtrading.com/showArticle.jhtml?articleID=209300026&cid=quant-center http://www.advancedtrading.com/showArticle.jhtml?articleID=209102204&cid=quant-center Enjoy. PS, Jack, thanks for keeping it under 1 page long.
The two that come to mind most easily are Derman's humorous autobiography and the very humorous "The Predictors". Also get the story on LTCM; it is funny too. "Bogle on Mutual Funds" reaches its pinnacle of humor when he compares mutual funds to indexes and to his holdings in stock of Vangard. Derman shows how the industry and its satellites functioned. My vantagepoint comes from circulating in those satellites and having the paradigm, its hypothesis set, and parametric measures that does the print you observed. I was made an MTS at BTL while in grad school. Being an adjunct prof at Wharton was fun too. The Links Club in NYC was a nice hang out for meals where some heavy hitters pass the time of day out of the public eye. The other clubs were at the top of various buildings. Because I have been active for more than 50 years, I see the past quant era from a different viewpoint. I had to put up with thescrew ups of the SEC when they were first learning how poorly programmed computers worked. It was tough educating them at the time. It took them quite a while to figure out I couldn't possibly know as many people as they were citing me for insider trading with. the youngest kids I have ever seen do trding were fifth graders at a private school in Hollywood.
well if you are interested in learning more on quant trading....pick up a wilmott or preferably Taleb's dynamic hedging book and start reading....fixed income or energies is the more likely source of employment for quant trading as equities groups are already swollen and still cutting back.