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Ernest Chan, Ph.D. QTS Capital Management, LLC. 1.

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Presentation on theme: "Ernest Chan, Ph.D. QTS Capital Management, LLC. 1."— Presentation transcript:

1 Ernest Chan, Ph.D. QTS Capital Management, LLC. 1

2 B.Sc. (Physics, U of T) Ph.D. (Physics, Cornell) IBM Research (Statistical pattern recognition, NY, 1994) Morgan Stanley (Data mining, NY, 1997) Cumulative Profits = N/A Credit Suisse (Stat Arb, NY, 1998) Mapleridge Capital (Futures, Toronto, 2002) Millennium Partners (Stat Arb, NY, 2003) Maple Securities (Stat Arb, NJ, 2003) Cumulative Profits < -$2MM E.P. Chan & Associates (Everything, Toronto, 2006) EXP Capital Management (Everything, Toronto/Chicago, 2008) QTS Capital Management (Forex, Niagara-on-the-Lake, 2011) Cumulative Profits > $2MM 2

3  Quantitative Trading blog, 2006).  “Quantitative Trading” book published by John Wiley & Sons, 2008.  Ongoing workshops in London, Hong Kong, Singapore. 3

4 “10,000 hours of practice is required to achieve the level of mastery associated with being a world-class expert” – Malcolm Gladwell 1998-2007: after about 10,000 hours of trading research and practice, I finally reached consistent profitability! 4

5  Learn from others: ◦ Blogs, books, papers, magazines, online forums ◦ Partners, clients (!), spouse (!) ◦ Readers (!) ◦ Workshop participants (!)  Emotional detachment from daily profits.  Look for fundamental principles of financial markets ◦ E.g. mean-reversion and cointegration, seasonality at different time scales, Kelly formula, linearity, etc. 5

6  Most importantly: “Make things as simple as possible, but not simpler” -Albert Einstein 6

7  Ideas generation ◦ Mainly from the aforementioned sources! ◦ The easiest part!  Backtesting ◦ Choose a suitable platform for yourself. ◦ Be aware of numerous pitfalls such as data snooping bias, look-ahead bias, survivorship bias, noisy/erroneous data, etc.  Paper trading ◦ Which platform allows you to fully automate? 7

8  Live Trading ◦ Always starts small. ◦ Position sizing, capital allocation, and risk management using Kelly formula. ◦ Beware of execution costs.  Continuous improvement and refinement of strategy. ◦ Improvement in strategy and/or execution technology. ◦ Can have dramatic impact on returns and Sharpe ratio! 8

9  Your own savings should be the seed capital. ◦ No pain no gain!  Friends and family? ◦ Would be better if they are familiar with trading.  Proprietary trading firms ◦ May impose too many restrictions. ◦ May not allow full automation. ◦ May be a good source of start-up capital. ◦ Profit share goes from 10%-100%. 9

10  Starting your own fund. ◦ Aforementioned PR is very helpful. ◦ Investors always approach me, never the other way around. ◦ Finding a good lawyer is important. 10

11  Through email:  Through my blog:  Through my website: 11

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