I have been a trader for over twenty years, and from the start of my hedge fund career working with Victor Niederhoffer I have taken a quantitative approach to researching and executing trading strategies. A quant trader is a trader that builds statistical models to test trading strategies rather than relying on intuition and experience. Today we will look at the history of Quantitative Trading from 4000 years ago up until the present day. We will discuss the contributions of people like Ed Thorp, Victor Niederhoffer, Mike Adam, David Harding, Martin Lueck, David Shaw and James Simons.
The very start of my career i have taken a a quant trader is just a trader that builds quants try to take a scientific approach and this approach really appealed to me in my experience to rely on, and i was able to look the different approaches to see which rules worked and which ones didn’t. but also because i feel that removing emotion when you look at the returns of
Different there is not a lot of overlap, and that is different traders will have different risk products or just have differing opinions as signal, thus as long as they are not trading as traders and investors, we can learn a lot people have tackled similar problems in the you might expect me to begin this story in a bit further in time than that, because quant price data,
And the first historical examples tablets that archeologists unearthed in central babylonian traders recorded the prices of tablets so that they could be analyzed and used to forecast future price moves. a massive fire destroyed the building where the clay tablets, leaving a record of ancient wouldn’t be matched until the merchant houses so as far back in history as we
Can go, we we also learn the importance of backing up your data. philosopher who achieved riches from an olive harvest by predicting the weather. the olive-presses in miletus, which would because the harvest was in the future, and be plentiful or not, he was able to secure the contracts for a very low price. poor harvest by earning at least some money there was a huge
Harvest and heavy demand for the olive presses. either he was an expert forecaster, or he lose much money for him, whereas the upside of a good harvest might be enormous. their ambition is of another sort”, according to aristotle. of george soros, who wanted to become a philosopher, who claimed to be able to forecast prices a technical trading system based on back-tested
Astrological signals. age, but at the time, astrology was a way thales had also made his meteorological predictions if kurz had just based his research on astrology, he also tried to back test his signals deducing such as the idea that prices of agricultural i’m sure a few of them are probably astrologers too. the dojima exchange was initially a marketplace but in 1710
A system of using coupons which from this, a secondary market of coupon trading the biggest speculator at the time was muna–hisa homma. he developed the “japanese candlestick” close market prices over a given length of in my early days as a trader i tested hundreds many that were predictive, but collecting we are told that homma’s “ultimate principle,” so it
Would appear that he was a mean reversion stories from the time claim that homma managed every four miles along the road between sakata this can be thought of as an early version for our next example we move to london in in detailed price charts that economists prepared later in the united states, charles dow, who helped launch the wall street journal popularized modern
Technical analysis. druckenmiller and paul tudor jones are known professor andrew lo of mit argues that technical analysis, however their methods were never and most of their rules arose from a mysterious reasonable sounding rules of thumb, raising questions about their efficacy. which i will link to at the end of this video in the united states in the mid 1960’s when
To computers and market data began analyzing markets. to invest sizeable sums of money beginning in 1964. dodd thorp writes in his autobiography that another professor around the same time at a number of papers on anomalies in stock market behavior. paper on statistical arbitrage and market microstructure. his paper ‘the analysis of world events of news print to
Determine the relative importance he left academia in 1972 to launch a quantitative hedge fund. these quant trading pioneers had strong backgrounds they got their start around the same time becoming popular, but instead of accepting i’d strongly recommend reading both of their their way of thinking, but are also really entertaining reads. they made outsize returns at a
Time when there were very few quant traders. street and in the city of london, but they they were nicknamed rocket scientists by the emanuel derman, who wrote the excellent autobiography at goldman sachs in 1985 and instantly noticing in the early 1980’s a london based sugar updating the commodities charts for the firm he hired in an oxford classmate (and computer they
Then recruited cambridge graduate david harding, to the team. they went out on their own and launched a they built quantitative models that traded after being bought out by man group the three capital and leuck launched aspect capital today ahl, winton and aspect are amongst the in the mid 1980’s the investment banks dipped morgan stanleys automated proprietary trading
A computer scientist who noticed that traders he built a database tracking the prices of and lowes or coke and pepsi, that might be on these price spreads returning to their the apt group at morgan stanley started the fame and robert frey who went on to develop morgan stanley shut down the group in the with how highly paid the traders were and nervous about the risk.
In 1988 code breaker and mathematician james on to be the highest returning hedge fund below to my video on james simons and to the the world has changed significantly over the a rarity in the world of finance, many tasks today a cell phone has significantly more pioneers of quantitative trading used in the 1960’s. it is a lot easier to do quantitative research today,
But equally there is a lot more competition. a lot of people think of quants as human computers, you the importance of idea generation and creativity. today, just like throughout history, a quant they need to be driven by curiosity to learn keep finding new trades that work, as over if you found this interesting you will probably should also check out some of the book
Suggestions in the description below. and the unsubscribe button – how else will i learn….
Transcribed from video
Quant Trading – A History By Patrick BoyleliveBroadcastDetails{isLiveNowfalsestartTimestamp2021-05-05T004513+0000endTimestamp2021-05-05T010302+0000}
