Automated Trading

I listened to an interview the other day. And as much as I want to say the name of the podcast and the "trader" interviewed I'll keep quiet for a change. Suffice it to say it's one of the more popular trading podcast series.

And the "trader" deserves "quotes" because they came across through their photo and "experience" as someone worth listening to and learning from. But after about 30 minutes of listening that reality came crashing down.

So where to start and what am I trying to say? Two things. First, and it relates to an aspect of the capital markets I truly despise, scam artists. Dressed in a nice suit and regulated by the SEC and et al.

And yet they (a) don't trade themselves and never did successfully and (b) love to tell other traders what they are doing wrong. Why do I say this about the particular trader interviewed? Because he references blowing up an account once or twice. Anyone who has blown up an account knows the count. They don't forget one or two and lose track.

This guy apparently runs a prop firm, yet when asked about futures and why they don't trade futures says "because he doesn't understand it." How can you trade anything and not understand the futures market?

The other point that irks me relates to the concept of automated trading. And how somehow, those who are systematic cannot find success. That for "quants" it's so much harder than discretionary traders.  That makes zero sense.

A successful discretionary trader is good at controlling emotions, being consistent with their strategy and managing risk. All of which any quant does. And does well.

But what truly separates a quant from a discretionary trader is they take a strategy and tear the hell out of it. They study years of data. They do more risk analysis than any discretionary trader ever will. Because they have the data and the history, that discretionary traders do not.  So a quant knows their strategy and edge greater than almost any discretionary trader. And somehow is hurt by that?

And quants, a true quant, runs their strategy religiously. Regardless of what fears they may or what they may "see" they run their strategy. The entire day is pre-planned. Backtested and proven to show a higher probability of success each day they run.

Quants are not the end all. There are opportunities to trade discretionary as well. But to say quants have a higher bar to achieve success is utter nonsense. And it was spewed by this "trader" I listened too. One that admitted he knows little about automation. Yet somehow he stands on a  soapbox and preaches about the difficulty facing any quant.

Software essentially plays a role in every aspect of our daily life. And for good reason. It's insanely good at redundancy. And yet with trading software is bad? Makes zero sense.

End of rant. Thanks for listening if you are still here.

No Comments Yet.

Leave a comment