Quantitative trading strategies use quantitative signals and a set of predefined systematic rules to make trading decisions. Strategies operate within parameters based on historical analysis (backtesting) and real world market studies (forward testing). Strategies may be executed manually (by a ...
1
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2answers
216 views
backtesting options strategies in R
I would like to backtest an options strategy in R. I require the ability to delta hedge and rebalance to options in the portfolio at different frequencies (daily, monthly,etc.) What packages are the ...
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votes
1answer
126 views
How to test the efficiency of Exponential Moving Averages as a trading startegy? [closed]
I would like to know how I can test the efficiency of Exponential Moving Averages when it comes to forex trading. Can i have any papers that point to the efficiency of this strategy?
Thank you. :)
3
votes
0answers
97 views
Quant/Stat Factor Performance Website/Distribution?
Does anyone know of a decent quant/stat factor website, distribution(public or private) or publication that tracks performance of "many" of traditional quant/stat factors? By that I mean would show ...
3
votes
1answer
133 views
How to determine ratios for mean-reverting basket
Suppose I have a basket of 3 securities A, B, and C. I believe that the basket is cointegrated and I want to create a mean-reverting trade. I fit the model:
...
-3
votes
0answers
86 views
Holt Winters Double Exponential Smoothing [closed]
I am looking out for Holt Winters Double Exponential Smoothing implementation using VBA Code.
I have searched everywhere but all I can observe, It comes with Excel Add-In. I am looking out for actual ...
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votes
0answers
52 views
Ocaml and Algorithmic Trading [duplicate]
I'm completely new to the Algorithmic Trading domain. I've just completed a course that was Ocaml based, and read about Jane Street. Obviously they are a huge company with a large amount of resources, ...
14
votes
2answers
793 views
From a high frequency point of view, with a price prediction and assuming infinite leverage, how do you determine optimal trade size?
I have read about something like Kelly criterion for long term expectation maximization assuming a fixed starting bankroll. But if one can assume unlimited leverage, and one has a signal for a price ...
2
votes
3answers
494 views
How to distinguish between different types of algorithmic trading
Algorithmic trading involves the use of algorithms to optimally execute trading instructions. Then there are algorithms which initiate trades, based on various quantitative strategies (e.g. pairs ...
10
votes
3answers
557 views
What is the expected return I should use for the momentum strategy in MV optimization framework?
As all research on the momentum strategies are focused on the indicator, i.e. the entry point, there seems not much discussion on its expected return? Though there are some discussions on the exit ...
12
votes
0answers
1k views
How do different methods and techniques used in pairs trading compare?
I was going through the paper of Avellaneda (2008) on stat arb and I found it interesting that he uses asset returns vs. their respective ETFs to compute the s-score.
I am wondering if anyone has ...
6
votes
4answers
482 views
Can risk aversion indicators anticipate financial crises? Research and/or strategies
In reference to this paper:
Can risk aversion indicators anticipate financial crises?
and the investable UBS Risk Adjusted Dynamic Alpha Strategy:
...
3
votes
3answers
422 views
portfolio diversification tester
Are there any online tools (optionally with developer API, to spare me the scraping) that given an existing portfolio, calculate how well a new candidate position would score to increase combined ...
1
vote
1answer
365 views
Calculating true value of a stock given the order-book and recent trades
I'm trying to calculate the 'true value' of a stock listed on an exchange. I have access to the limit order-book (containing all bid/ask quotes) and also all trades which have taken place (which ...
16
votes
7answers
1k views
How to design a custom equity backtester?
I was thinking about writing my own backtester and I realize I have to make some assumptions. So I was hoping I could post what I am planning on doing and hopefully some of you can give me some ideas ...
3
votes
1answer
233 views
Usage of Random forests in Quantitative analysis of stocks
I have a question about Random forests and how they could be utilized in trading?
I heard Random forests are used for classification, is that accurate? If so, could someone give an example of what ...
0
votes
1answer
153 views
Selecting timeframe for time series analysis
In technical analysis, we may use confluence of direction for 3 timeframes to roughly gauge bias of market now.
Similarly, if we use time series forecasting methods to predict(say daily data-whether ...
13
votes
7answers
5k views
Switching from Matlab to Python for Quant Trading and Research
Has anybody else out there made this switch? I'm considering it right now. What were the negatives and positives of the switch?
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votes
1answer
189 views
Target daily ROI for a market-making algorithm
I'm designing a market-making algorithm, I was wondering what a decent ROI / day would be to aim for in such a system?
4
votes
2answers
408 views
Cointegration trading: Ignoring pairs that aren't economically related
Cointegration trading question
What's the state of the art when it comes to choosing proper subsets of stocks/assets where cointegrating relationships aren't ignored as (likely to be) spurious?
For ...
3
votes
1answer
291 views
Understanding Passive Rebate Arbitrage
I was reading a BMO paper which offered the following example of passive rebate arbitrage:
"For example, if BBD.b is trading at $4.71 - ...
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votes
1answer
277 views
Can a programmer be a quant trader without knowing all that math and models? [closed]
Is it a requirement to be a math person in order to work as a quant trader? Have you seen a non-math good developer successful in this career?
5
votes
2answers
668 views
Optimality of Kelly criterion in non-normal environment
It is a not so well known fact that the Kelly criterion is only optimal in a nice and well-behaved Merton-world. It is far from optimal when things are getting non-(log)normal (i.e. more realistic!).
...
8
votes
1answer
746 views
What is the Sugihara Trading System?
I recently heard the term Sugihara Trading System. I guess it might be some trading strategy or a special model to predict trends in market data, but I couldn't find out anything about it. Does anyone ...
0
votes
0answers
152 views
Lagging Beta Strategy
Came across a method involving pairs in the book Hedge Fund Market Wizard:
Given a Stock(or Collective of instruments)that follows closely to say Dow index with a beta<1(very short term) but ...
6
votes
3answers
424 views
Why is random trading minus transaction costs not zero expected value?
Somebody was telling me that if you buy randomly and assuming no transaction costs in todays market place, you wont make money 50% of the time and lose 50% of the time because of adverse selection. Im ...
2
votes
1answer
287 views
Using alpha to evaluate trading strategy
I have a trading strategy that generates returns $R_{t}$. I want to test the strategy by looking at the alpha:
$R_t - R_{f,t} = \alpha + \beta (R_{m,t} - R_{f,t}) + e_t$
I compare my alpha against ...
5
votes
1answer
404 views
Statistical significance of trading systems that use indicators with long lookbacks
Let's say we have a trading system that trades daily, holding for one day, but uses an indicator that looks back over the last 5 years. A simple example could be the percent change in price of an ...
1
vote
2answers
435 views
Evaluating forecasting algorithm
I am trying to evaluate a forecasting algorithm for stock price prediction. However, the performance of the algorithm may be very much tied to the trading strategy.
Is there a systematic way for ...
1
vote
0answers
69 views
How to trade risk-adjusted returns?
Why does dividing daily returns by daily range eliminates fat tails and results in an (almost) gaussian distribution?
And how could that distribution be exploited to enter trades?
0
votes
0answers
128 views
Cost of a trading startegy [closed]
I have a question about the cost process of a trading strategy. Suppose we work in the finite discrete case and holding just one risky asset for simplicity. Let $\phi=(\theta,\eta)$, where $\theta$ ...
1
vote
1answer
127 views
normalized accumulation distribution
I am looking for a way to take an accumulation/distribution indicator and normalize it
so I can compare a bunch of stocks with stock prices that have no relationship with each other.
EDIT: This ...
5
votes
4answers
841 views
How should I include the bid-ask spread as a transaction cost in a backtest?
I have two backtesting algorithms:
One that uses bid and ask prices for signal generation. For example: Buy when $ask < threshold_1 $ and sell when $bid > threshold_2$. Bid and ask prices are ...
2
votes
2answers
972 views
How much capital do I need to create a competitive automated trading strategy?
I'm a relatively small investor, and I'm interested in building my own fully-automated quantitative trading strategy. I also read about dark pools, and how difficult it is to get good prices on ...
-1
votes
1answer
298 views
Regression and its application [closed]
I am currently working on model where I am using 21 period moving regression line and RSI to gauge trading opportunity. I am more interested in enhancing this using rest of regression parameter such ...
0
votes
3answers
728 views
Appropriate method for calculating negative returns on a trading strategy?
I have a cumulative profit/loss time series below for a trading strategy, what is the appropriate way to calculate the returns in percentage for such a series?
My issue is the appropriate ...
5
votes
2answers
686 views
How are momentum and reversion long/short strategies dynamically combined in trading?
I'm trying to understand how to combine two strategies dynamically in trading: one mean-reversion and the other momentum.
One way (also the simplest one) of doing this is by scaling/normalizing ...
0
votes
0answers
35 views
Inferring Returns From Minimal Data Points [duplicate]
Possible Duplicate:
How much data is needed to validate a short-horizon trading strategy?
Suppose I have daily returns for a trading strategy against one month of data. Before starting ...
9
votes
1answer
311 views
How does one measure the effect of latency on potential returns?
I am looking to evaluate the hypothetical advantage one trading system has over another in terms of the possible returns given their latency.
Irene Aldridge wrote a piece (How Profitable Are ...
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votes
1answer
871 views
Can end-to-day trading be profitable? If not, why? [closed]
Many academics argue that end-to-day trading, where you go long or short before opening and sell your security at the end of the day, is not profitable. Various explanations are given for this ...
12
votes
3answers
2k views
What are the best sources for equity quantitative research?
What are the best sources of quantitative finance research in equities?
I will list a couple and note an asterisk if the research is available by request (i.e. non-clients) or online:
BAC-Merrill ...
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votes
1answer
339 views
Trading Strategies and Portfolio Constructions based on Cross Sectional Regression? [closed]
I often see trading strategies and portfolio construction that are based on cross-sectional regression. For example, I often see regressing some numbers against some factors.
I was wondering how ...
12
votes
2answers
1k views
statistical arbitrage option overlay strategies / volatility trading
Here's an interesting trading puzzle that I would love to get the community's input on.
Let's say there exists an alpha signal that does a good job of sorting equities expected excess returns over ...
14
votes
7answers
4k views
How are cryptography and speech recognition technology applied to forecasting financial markets?
One of the answers to my previous question regarding the strategy of Renaissance Technologies, there was a reference to The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly ...
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votes
1answer
370 views
How to calculate the weight of the stocks using the linear regression?
I do a simple example with the follow three series(stocks prices):
...
1
vote
0answers
339 views
Using volatility cycles to switch between trend following & range bound trading? [closed]
"...a low volatility environment is usually a good environment for trend following strategies; see Jez Liberty’s state of trend following report here..."
...
12
votes
4answers
765 views
HFT: What is the big differentiator in comparison to other time scales?
High Frequency Trading (HFT) seems to be the big money making mystery machine these days. The purported source of unlimited floods of gelt pouring into the investment shops using it.
For me, HFT is ...
11
votes
3answers
1k views
Techniques to optimize the placement of orders in market making strategy?
Market making often requires placing and canceling a lot of orders. You have to buy and sell nearly simultaneously, so you need to move orders pretty often to beat other traders. But I would like to ...
3
votes
2answers
327 views
Distribution for High Kurtosis
Can you please advise which distribution to follow when your skewness is 0.28 and Kurtosis value is 51. Since it's leptokurtic and positively skewed I would like to fit distribution and also wanted to ...
0
votes
0answers
472 views
What is the current state of the algorithmic trading research? [closed]
Searching for 'algorithmic trading' through scholar.google.com reveals a large list of trading strategies, related on topics like the liquidity of markets, volatility modelling, volume modelling, the ...
7
votes
5answers
1k views
Is Visual Basic a fast enough for millisecond orders
I have an API that for an order routing platform that is in visual basic. The maximum frequency or orders to exchanges will be milliseconds, where the underlying systems are expected to be able to ...
