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Gumption

What Should I Read or Do?

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Hello.

 

In this thread I will attempt to communicate my ambitions and I hope that I can get advice as to do to take on my ambitions or reject them.

 

To begin, I'll state some things about myself so you can look through my perspective, possibly limitations , and fallacies.

 

Me

 


  • I am a senior in Highschool.

  • I plan on studying Computer Engineering in college. This completely not set in stone. I have gone back in forth between Computer Engineering and Computer Science as possible majors.

  • I am fascinated with math; I have taken a Calculus course last year and am in a Statistics course this year. I took an Economics class last year but unfortunately remember very little.

  • I have a good understanding as to how stocks and the stock market works. I understand the difference between investing and trading, but know very superficially how to go about doing them profitably. I also know superficially what a derivative is.

  • I know very little about Quantitative Finance, but I think it is really interesting to be able to model different markets.

  • Algorithm Trading seems fascinating, but I have absolute zero basis on how to actually do it or what type of math is really involved in it. I suppose this falls in with Quantitative Finance? (you can probably see my ignorance by now :haha:)

 

My Ambitions

 

  • I would like to enter the Quantitative Finance field as some sort of trader.

  • I would like to have a solid mathematical knowledge towards the markets. Like pricing models, derivatives, etc.

  • Make money

 

So you have read some things about me that I feel are related to my ambitions and you have read my ambitions. Now I have some questions that may tailor your response to me.

 

  1. I seem to be more interested in technical analysis, but should I read and learn about fundamental analysis prior as some foundation?

  1. Are a lot of books outdated now?
  • For example, Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John Murphy is considered to be a bible yet it was made in 1999(?). I would imagine a lot has changed and thus a waste of time to read? Even the latest edition of Intelligent Investor by Benjamin Graham was made in 2003 (ish?).

  • What should I read? :)

  • What type of math should I learn?

  • Am I wasting my Time?

 

Those seem to be my broad/starting questions that i can think of. I have more specific questions that I can probably ask at another time.

 

So hopefully you took some time to read this and think. I would like to read your opinions. Please be honest.

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Why not spend some time finding out a little bit about how quant firms operate? What you'll probably find is that the compsci/engineering path you're going down (assuming you're good at it) can lead you very naturally into that line of work in a few years time. At your age it is almost certainly easier to excel with your education and choose finance as a career later on than it is to start thinking about trading now.

 

If you want some good introductory books to read to help understand the intersection of computer science and the modern trading environment then have a look at Michael Durbin's "High Frequency Trading", Scott Patterson's "Dark Pools", and Larry Harris's "Market Microstructure for Practitioners".

 

Hope that's helpful,

 

BlueHorseshoe

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Find quantitative analytics jobs to boost your career in quantitative finance

 

Suggestion:

Have a scan through the job descriptions for whatever quanty jobs capture your attention.

It may give you a sense of what programming languages/attributes these guys are looking for, and provide better sense of direction for your study.

 

As an aside, I've heard it said before that while many quants are technically brilliant, many lack actual trading experience. The employers don't seem to care, so maybe it ain't no thing.

But if you wanted to have a play around on SIM, in a proper futures market, I'd sign up for a free trial with AMP Futures. Comes with a free trial CQG feed to the major exchanges.

NB: Ninjatrader price ladder is garbage / Market delta has no price ladders that I'm aware of, but quite interesting/cool footprint charts.

 

GL

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Rather than jig around with retail toys, Id suggest reading the following to get a professional approach:

 

Derivatives:

Options, Futures and other Derivative Securities by Hull

Option Volatility and Pricing by Natenberg

 

Quant/Algo/HFT:

High Frequency Trading by Irene Aldridge (enough maths and stats to keep you amused)

 

 

By the sounds of it, options, and derivatives in general may be more appealing to you due to the maths - especially options. Option trading is based around models more than any other trading.

 

However, if you want to focus more on the mechanics of trade more than the relation ships of product your trading, then just start simply in equities and start with the Aldridge book. You can broaden into derivatives later if you wish.

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Quant/Algo/HFT:

High Frequency Trading by Irene Aldridge (enough maths and stats to keep you amused)

 

 

Hi Dude,

 

I nearly bought this last week, but was put off by the poor reviews on amazon, eg:

 

"A complete waste of money and time ............

I presume that this book will be bought mainly by those that have a decent level of statistical and financial knowledge (as the title obviously targets a pretty niche area) - these people will be sorely disappointed.

 

This book is a cross between basic introductory courses in econometrics and finance (and it even does this poorly)"

 

Maybe I'll take another look or try and find reviews elsewhere, but it's useful to know that you recommend it.

 

BlueHorseshoe

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This book is a cross between basic introductory courses in econometrics and finance (and it even does this poorly)"

 

"but it's useful to know that you recommend it."

 

lolol, i know it wasn't meant this way, but at first it came across to me as a subtle shot at The Dude.

 

del-big-lebowski-white-russian-mdn.jpg

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lolol, i know it wasn't meant this way, but at first it came across to me as a subtle shot at The Dude.

 

It definitely wasn't meant that way - I'm sure the Dude knows from our previous conversations on TL that I genuinely respect his opinion.

 

What's the screenshot from, by the way?

 

BlueHorseshoe

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Now I have some questions that may tailor your response to me.

 

  1. I seem to be more interested in technical analysis, but should I read and learn about fundamental analysis prior as some foundation?

  1. Are a lot of books outdated now?
  • For example, Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John Murphy is considered to be a bible yet it was made in 1999(?). I would imagine a lot has changed and thus a waste of time to read? Even the latest edition of Intelligent Investor by Benjamin Graham was made in 2003 (ish?).

  • What should I read? :)

  • What type of math should I learn?

  • Am I wasting my Time?

 

It is always worth knowing both fundamental and technical aspects - and be prepared to have plenty of arguments over both. Given your quant bent, I would focus on both, but ensure you focus on the maths side.

A lot of fundamental analysis is individually tailored to a single stock, while a quant model might be more inclined to help construct a portfolio. It can also be used on single instruments as well......but dont throw either approach out.

Many quants are currently distancing themselves from Technical analysis. Some see it totaly seperately others as part of it.

 

Books will never be outdated on this until someone finds the holy grail! Most books will give you bits of the puzzle and you have to be able to get what value there is out of them. Some are technical - as a quant, learn from these. Some are more discretionary and might give you ideas to test, and understand what does and does not work and what can and cannot be modeled, back tested etc.

as for maths - econometrics/statistics and probability...calculus and anything to do with data series and analysis.

You are young and not wasting your time. Lets say you apply 30mins a day (less than your facebook/porn addiction maybe :)) to learning/studying some aspect of finance. You are 18 ? - by the time you are 28 you will know plenty - more than most - just as you get into peak earning years. Even if you are not in finance - this information will be useful to have.

There are plenty of lists of books around - the Dude offers some good ones. They might be a bit advanced but hey throw yourself in the deep end.

One other thing you should do - even though its sometimes not recommended - at your age i would select some random stocks - select some stocks scientifically - and then track them. See how they go for 6 months. Follow them, see how they move, how they react - that is a good education for a start.

Edited by SIUYA

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don't want to derail the ops thread so I'll duck out from here after this:

re: The Dude. Famous character from the movie The Big Lebowski. He loves drinking White Russians.

I assume that's where the username came from

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Hi Dude,

 

I nearly bought this last week, but was put off by the poor reviews on amazon, eg:

 

 

 

Maybe I'll take another look or try and find reviews elsewhere, but it's useful to know that you recommend it.

 

BlueHorseshoe

 

Yeah - I saw that. There's another review below which seems a bit more positive though. I think it's a good book for someone who doesnt have a maths professorship at Yale.

 

Always worth remembering there are probably more blowhards giving reviews around the internet than there are on trading websites!!

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don't want to derail the ops thread so I'll duck out from here after this:

re: The Dude. Famous character from the movie The Big Lebowski. He loves drinking White Russians.

I assume that's where the username came from

 

 

top marks!

 

The message you have entered is too short. Please lengthen your message to at least 20 characters.

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My Ambitions

 

  • I would like to enter the Quantitative Finance field as some sort of trader.

  • I would like to have a solid mathematical knowledge towards the markets. Like pricing models, derivatives, etc.

  • Make money

 

So you have read some things about me that I feel are related to my ambitions and you have read my ambitions. Now I have some questions that may tailor your response to me.

 

  1. I seem to be more interested in technical analysis, but should I read and learn about fundamental analysis prior as some foundation?

  1. Are a lot of books outdated now?
  • For example, Technical Analysis of the Financial Markets: A Comprehensive Guide to Trading Methods and Applications by John Murphy is considered to be a bible yet it was made in 1999(?). I would imagine a lot has changed and thus a waste of time to read? Even the latest edition of Intelligent Investor by Benjamin Graham was made in 2003 (ish?).

  • What should I read? :)

  • What type of math should I learn?

  • Am I wasting my Time?

 

Those seem to be my broad/starting questions that i can think of. I have more specific questions that I can probably ask at another time.

 

So hopefully you took some time to read this and think. I would like to read your opinions. Please be honest.

 

Hi Gumotion,

 

Ok I will be honest. If you want to be successful, forget all you wrote regarding quantitative finance, algorithm trading, fundamental- and/or technical analysis or reading any books.

 

Trading is all about the proper numbers on your chart as well as good conditioned volume informations. Besides this you just have to understand the basics of reading price action.

 

The most important though is your angel of view to the market and to view it as it is, namely a place where groups of people with infinite money manipulating the market to cheat on each other and especially on the retail traders. Or why do you think that more than 90% of the retail traders fail? If you want to be counted to the minority that makes money, you have to act savvy. Welcome to reality! :)

 

Abde

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I would suggest that you get some practical experience trading even if its just a small account. You might also start to check around forums like Wilmott. This question comes up quite a bit there. Most hedge funds will only hire a Phd or a quant with an MBA/MFE. MFE sounds likea good choice. Some sort of post graduate work is often considered a "minimum" to get into the door. You'd be well advised to learn some programming language too. I recommend C#. The other route is try to do it yourself and go down the algorithmic route. If you go that route then you'll want to focus more on the programming side and working with large data and you'll be looking more at trying to get a job at a proprietary or market making fund.

 

Best of luck..

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I found these sites interesting, you could test your strategies in Wealth-Lab either by buying the software or having an account with Fidelity.

 

Google:alphapowertrading, Wealth-Lab Pro / Wealth-Lab Developer

 

It would not hurt to have a back up plan, to specialize in computer security while also learning programming in financial markets. My neighbor works in internet security for AT&T and tells me that there are not enough people who really know the stuff, you want to be able to find a job that pays well and will allow you the funds to trade while you learn.

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Hi Gumotion,

 

Ok I will be honest. If you want to be successful, forget all you wrote regarding quantitative finance, algorithm trading, fundamental- and/or technical analysis or reading any books.

 

Trading is all about the proper numbers on your chart as well as good conditioned volume informations. Besides this you just have to understand the basics of reading price action.

 

The most important though is your angel of view to the market and to view it as it is, namely a place where groups of people with infinite money manipulating the market to cheat on each other and especially on the retail traders. Or why do you think that more than 90% of the retail traders fail? If you want to be counted to the minority that makes money, you have to act savvy. Welcome to reality! :)

 

Abde

 

By 'reading price action' you mean using chart analysis?

 

Also, how does one act savvy?

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By 'reading price action' you mean using chart analysis?

 

Also, how does one act savvy?

 

No by price action I don´t mean chart analysis in the classical sense like trendlines, support and resistance or chart patterns. .

 

It´s meant towards understaning the market structure where the most price/volume action will be occur and where the market tends to react in one way or the other.. To be named here as an example is a understanding and the applicability of market profile. Also helpfully is the use of an VWAP and his standard deviation bands.

 

To your question - How does one act savvy?

 

To make a long story short, by buying and selling at an appropriate point when the majority is doing the opposite. To be able to do that you have to know the major decision points in the market and have them on your chart. The rest is peactice.

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