Quantitative trading series | Part 3 – Let the machines work for you

Pavel Hála | Quantitative trading | 6. 7. 2015

In the previous article I described the tool that scans through the commodities markets and find interesting trading opportunities based on seasonality and contango. I also told beginners in quantitative trading not to get discouraged by the complexity of my description. I’ll describe my own beginnings in future parts of this series, because I also started with simple methods like everybody else.

On the contrary, today I’m gonna explain you why it’s a great advantage to learn more complex methods. The program described last time wasn’t simple. This is proved by the fact that the calculation had taken several minutes of computer time. On the other hand, I now work with models where the calculations takes even tens of hours. Such a program is very complex and process huge amounts of price and fundamental data. Do complex things discourage you? It should definitely not. The more complicated calculations the program can handle, the more work it can do for you. Of course, development of such a complex program takes months and is based on years of study and experience. But the invested time is really worth it! You can then create a tool, which could do hard work for you. It can save you hours spent by analyzing the market and searching for trading opportunities. Moreover, as I wrote last time, not only it would save you time, but using the computer calculation can let you do things that are not possible manually.

Many people think that the ability to automate calculations can miraculously bring them success. This is certainly not the case. You’ll have to put a large amount of your own ideas and work. Developing an extensive functional program is like building a house – you start architect, continue with building and finally repair what went wrong. But once you’re done, you can repeatedly execute the program as many times as you want. Work that you previously had to do yourself is then done by a machine. That brings me back to the title of this article. Thanks to your our own analytics, you can achieve that your workday would have nearly 24 hours. I run most of my scripts and programs overnight due to huge computational cost. I actually work this way even when I sleep.

Quantitative approach is becoming popular in trading and investing. It’s clear that this trend will continue. Like people today do laundry in a washing machine and a wash dishes in a dishwasher, they will increasingly automate investment research and have it done by the computer. Those who adapt to it and use it for their own advantage, will gain significant advantage over other traders and investors in the future.

Tags: