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Presentation on theme: "ARI SIEGEL PRINCIPAL TURNING WHEEL CAPITAL Quantitative Trading."— Presentation transcript:


2 What is Quantitative Analysis? “A business or financial analysis technique that seeks to understand behavior by using complex mathematical and statistical modeling, measurement and research. By assigning a numerical value to variables, quantitative analysts try to replicate reality mathematically.” – Observe behavior Counting Statistics Price movement vs. technical vs. fundamentals Market moves may not repeat, but they often rhyme

3 Where quants work Buy side  Hedge Funds  Banks  Other prop trading desks (Trade, Insurance co’s, etc.)  Self Sell side  Sales & Trading  Derivatives  Hedging

4 Quant Roles Trader Programmer Analyst P/L vs. non-P/L Strategy generation vs. analysis and programming

5 What is a trader? A trader buys or sells securities in a market. Execution Discretionary Proprietary Market Maker Floor Trade Speculator

6 Trader vs. Securities Analyst TRADERANALYST DirectionYES SizeNO Entry Price & Strategy? Hold timeYES (ROUGH) Risk ManagementNO Exit Price & StrategyYES Act on AnalysisNO P/L Responsibility? High Compensation? Long HoursYES Ever-morphing puzzleYES?

7 How to find a Quantitative trade Idea (observation, original thought) Data collection  Price/technical/fundamentals database  Charts  Internet  Other resources  Data scrubbing Testing – pencil/paper, Excel, statistical software Trade it in small size for some time Scientific method

8 Statistics Conditions Forward expectation  Average move (Mu)  Standard Deviation (s)  # of observations (n)  T-score = Mu / (s/SQRT(n)) Regressions, neural networks, AI

9 Quant Trade Process Part 1 Find a Trade Conditions  Short term  Long term  Seasonal  Intermarket Test Compare to other patterns, current data

10 Quant Trade Process Part 2 Create a plan Direction Size Entry (Price, Time) Exit (Price, Time) What ifs

11 Quant Trade Process Part 3 Trade your plan Entry issues Unusual moves What ifs New data – change the plan? Exit issues

12 Quant Trade Process Part 4 Improve your trading Track trades  P/L  Short vs. Long  Decisions – overrides, adds, longer holds, etc. Analyze trading results Optimize Evolve

13 Quant Trading Scenarios Black box vs. Human execution System vs. Discretionary Unusual circumstances Changing Cycles Efficient Markets??? NOT ALWAYS!

14 Trading Futures What are futures? PPhysical vs Financial, delivery vs cash-settled Index futures S&P 500 futures= VVery liquid VVery transparent (marked-to-market each day) LLow commissions ($2.40 per $74,000) HHigh leverage LLow barriers to entry Managed futures

15 My Company – Turning Wheel Capital Start up trading business similar to hedge fund Manage money for outside clients and myself Began Jan 1 2007 with $25,000 of my own $ while working at a hedge fund August 1 2007 $62,000 in assets, my own $ November 2007 $1.2MM in assets, 3 outside clients Goals  February 2008 $3MM AUM  November 2008 $10MM  December 2009 $100MM

16 My background Victor Niederhoffer 2004-2007 aapprenticeship MBA, Yale SOM 2004 Start up companies 1999-2002 Poker 1997-1999 Start up companies 1994-1997 Music 1988-1994 NYU B.A. Music Technology 1992? UNC-Chapel Hill 1987

17 Money making personality Appetite for risk Analytical mind Competitive Driven to win Sports, Poker, Games Survivor Quant Trader Characteristics  Puzzles, games  Counting  Logical, analytical, problem solving  Music  Patterns

18 Be a star Figure out what you truly want – 95% of the game Be honest with yourself and others Take risk – but try to weigh consequences Hold out for what you want – don’t settle Trust your gut – have conviction Do your own research – question the experts Don’t be a sheep Try to be the best in your field, reach for brass ring Focus on the process and the results will come 800% return in 2007 Market Wizards by Jack Schwager

19 Questions? ?


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