please list similarities, differences, and comments. (thanks in advance)
A quant goes to a bookstore to buy a book. The service person says, “Can I help you?” The quant says “My Life As a Quant”. The service person, misunderstanding him, says, “My wife is a c*** too! I know exactly how you feel! Can I help you find a book?”
“New Trading Systems and methods”, at 1,200 pages, is one of the trader bibles. I’ve yet to buy this but it probably has detailed answers to your question. The simple answer can be found through a wikipedia search.
@ JOE2010 haha! i have actually finished reading that book. Derman was research quant, as opposed to a quant trader - though there might be some overlap. @ nocareer i have that ridiculously huge book by Kaufman, but have been so busy that i’ve never gotten to it. of course i can wiki/google the theoretical/academic distinctions between those fields, but i wanted to get a more experienced practitioner’s view in each or both fields.
Quant trading is a subcategory of regular trading, but the skills required to do it are so specialized that people are either good at quant trading or “regular” trading, and - as far as I know - there is not a lot of flow between them. In quantland, the distinction between trading and portfolio management is mostly about time frame. Quant trading is primarily about high frequencies, ranging from holding periods of a few seconds to holding periods of, say, a week. Quantitative portfolio management is more about holding periods of weeks, months, and years, but there is a point where one set of strategies blends into the other. There is also quant trading research into how to execute large trade sizes efficiently. If you have a large block of stock you need to dump, there may be some quant algorithms that tell you how to chop and distribute your orders so as to reduce the price impact of your stock. That’s a little different from traditional portfolio management, but it’s still relevant. A lot of quant trading is called “algorithmic trading,” which is basically developing a set of rules for when you buy and sell securities and how you size your positions. The main advantages of this are that computers can scan and evaluate these rules much faster than human beings, and also that computers don’t get emotional about implementing the rules when they make or lose money. That’s great if your rules are actually “correct” rules, but of course a computer will happily drive you into bankruptcy if you tell it to go ahead with the wrong rules. By the way, a lot of “high frequency algorithmic trading” is effectively computer implementation of technical analysis. It’s just that “analysis of the spectrum produced by a fast fourrier transform” sounds a lot more scientific than “head and shoulder pattern.” Non-quantitative trading, sometimes called “discretionary trading” uses human beings to implement trading strategies. These may have specific rules (good ones do) and may or may not have room for human discretion (which is good if the human has real talent). It’s useful for stuff that involves insights that are difficult to program into a computer (e.g. how is the economic structure of the world evolving, and what does that mean for the change in future risk premiums), etc… Good discretionary traders generally have a good feel for who is buying and selling in the market, who has market power, and how that power changes over time. That way they can enter a trade and command a better price when they have market power and avoid it when they don’t.
^^ +10
nocareer Wrote: ------------------------------------------------------- > “New Trading Systems and methods”, at 1,200 pages, > is one of the trader bibles. I’ve yet to buy this > but it probably has detailed answers to your > question. The simple answer can be found through > a wikipedia search. So I worked with Perry for a long time as his risk manager and helping with programming projects. I’m pretty sure that Perry doesn’t have any idea what “analysis of the spectrum produced by a fast fourrier transform” means (it’s also not a useful trading tool IMHO). Perry writes these monster long programs (in Fortran of all things) that implement bajillions of those trading rules. If that book is the Bible, then Perry ought to be the God of algorithmic trading. Then I should have gotten large bonuses based on Perry’s trading. But I don’t think I ever got large bonuses based on Perry’s trading…
JoeyDVivre Wrote: ------------------------------------------------------- > nocareer Wrote: > -------------------------------------------------- > ----- > > “New Trading Systems and methods”, at 1,200 > pages, > > is one of the trader bibles. I’ve yet to buy > this > > but it probably has detailed answers to your > > question. The simple answer can be found > through > > a wikipedia search. > > > So I worked with Perry for a long time as his risk > manager and helping with programming projects. > I’m pretty sure that Perry doesn’t have any idea > what “analysis of the spectrum produced by a fast > fourrier transform” means (it’s also not a useful > trading tool IMHO). > > Perry writes these monster long programs (in > Fortran of all things) that implement bajillions > of those trading rules. If that book is the > Bible, then Perry ought to be the God of > algorithmic trading. Then I should have gotten > large bonuses based on Perry’s trading. But I > don’t think I ever got large bonuses based on > Perry’s trading… Here is the man we all know. Welcome back GOD!
^ thank you bchadwick