The obligatory reference for a thread about trading strategies is the collected works of Nassim Nicholas Taleb.<p><a href="http://www.fooledbyrandomness.com/" rel="nofollow">http://www.fooledbyrandomness.com/</a><p><a href="http://www.amazon.com/Nassim-Nicholas-Taleb/e/B000APVZ7W" rel="nofollow">http://www.amazon.com/Nassim-Nicholas-Taleb/e/B000APVZ7W</a><p>Structuring the trades to reduce your exposure to downside risk while increasing your exposure to upside from unanticipated random events is the hard strategy to implement, but it is the sole strategy for avoiding a gambler's ruin.
I think the key thing that this piece sort of hints at is that there <i>is</i> money out there, but there isn't <i>free</i> money out there.<p>If you want to make money trading on the stock market (with algorithms or otherwise), you're directed to devote time, effort, skill, and a large quantity of start-up funds to the effort. Of course, you could also devote time, effort, skill and capital towards starting your own business (based around algorithms or otherwise) or you could devote time, effort, and skill towards just getting a job (programming algorithms or otherwise). Likewise, as there are big players in the stock market, there are big players in any market, and smaller, more nimble businesses can try and maneuver around them (or get crushed trying).<p>The stock market: just a part of real life. Neither a mystical land of fantastic riches, nor a freakish unholy pit of dishonest vipers and shattered dreams.
The general rule of thumb is that if a trading strategy is successful, you won't find it in a book. Books are useful for understanding the general concepts, but I use books in the negative sense (if I find the idea in a book, I immediately throw it out)
Quant trading is like anything - time and effort. You read a few sites, play with some data, read a few books, test and continually refine your strategies, learn more and brainstorm of new approaches. It can be pretty fun depending on who you are. But in the end I think enjoyment comes down to a love of problem solving, the difference with quant trading is it's financially self-sustainable and rewarding. Other projects lack the immediate pay-off, but take my word for it, will be more rewarding in the long run. Stick to your programming, your research, your show HN.<p>Also, the first cited site is Ernie Chan's which provides a similar established perspective
Shameless plug for a genetic algorithm based trading strategy app I made a while ago. It generates a bunch of strategies with good scores and then the UI let's you pick the one's you actually want to use. The second video is the demo:
<a href="http://designbyrobots.com/2011/09/06/automated-design-of-trading-strategies/" rel="nofollow">http://designbyrobots.com/2011/09/06/automated-design-of-tra...</a>
Ways to make money in the stock market<p>- Own a trading floor<p>- Become a stockbroker<p>- Become a market maker<p>- Sell books on the subject<p>- Work for a financial institution
In the article I read the following:<p><i>Despite common perceptions to the contrary, it is actually quite straightforward to locate profitable trading strategies in the public domain. Never have trading ideas been more readily available than they are today.</i><p>What is the input of the "retail" trader then? Especially considering that at this level tech does not make a difference (all have access to somehow high computing power).<p>By the way, any good backtesting tool in python or R? I started implementing a simple trading algo last week during my freetime (yeah, I have to go out more) and I was wondering how will I test it.
There is no such thing as "consistent profitability" in trading. Trading is not a business where you make a product and sell it to someone, and the more and better you sell, the more you make. It is much more alike to gambling, but with probabilities of winning and losing a bet always changing. You need to know when to bet, but you have no way of knowing the probabilities beforehand. Thus you cannot be sure that your strategies will keep working tomorrow or a year from now. Nor can you be sure of always being able to develop a new strategy that is better than old one.
Likely and apparently the unique, unchallenged, world-class, grand champion of stock market trading is James Simons. So, how'd he do it? Well, first he is a darned good mathematician.
Try the calculator in this blog to see how easily one can be fooled by random data: <a href="http://www.priceactionlab.com/Blog/2012/06/fooled-by-randomness-through-selection-bias/" rel="nofollow">http://www.priceactionlab.com/Blog/2012/06/fooled-by-randomn...</a>