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How to Succeed in Quant Trading Business with a lot of trying

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Presentation on theme: "How to Succeed in Quant Trading Business with a lot of trying"— Presentation transcript:

1 How to Succeed in Quant Trading Business with a lot of trying
Ernest Chan, Ph.D. QTS Capital Management, LLC.

2 About me Cumulative Profits > $2MM 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 Could you please raise your hand if you are already a reader of my book or my blog?

3 Along the way … Quantitative Trading blog epchan.blogspot.com, 2006).
“Quantitative Trading” book published by John Wiley & Sons, 2008. Ongoing workshops in London, Hong Kong, Singapore.

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

5 Key ingredients 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.

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

7 Key ingredients in details
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?

8 Key ingredients in details
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!

9 Raising capital 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%.

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

11 Keep in touch! Through Through my blog: epchan.blogspot.com Through my website:


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