Ernest Chan, Ph.D.QTS Capital Management, LLC.                                 1
B.Sc. (Physics, U of T)   Ph.D. (Physics, Cornell)        IBM Research (Statistical pattern recognition, NY, 1994)        ...
   Quantitative Trading blog    epchan.blogspot.com, 2006).   “Quantitative Trading” book published by    John Wiley & S...
“10,000 hours of practice is required to achievethe level of mastery associated with being aworld-class expert” – Malcolm ...
   Learn from others:    ◦   Blogs, books, papers, magazines, online forums    ◦   Partners, clients (!), spouse (!)    ◦...
   Most importantly:    “Make things as simple as possible, but not simpler”                                -Albert Einst...
   Ideas generation    ◦ Mainly from the aforementioned sources!    ◦ The easiest part!   Backtesting    ◦ Choose a suit...
   Live Trading    ◦ Always starts small.    ◦ Position sizing, capital allocation, and risk      management using Kelly ...
   Your own savings should be the seed capital.    ◦ No pain no gain!   Friends and family?    ◦ Would be better if they...
   Starting your own fund.    ◦ Aforementioned PR is very helpful.    ◦ Investors always approach me, never the other way...
   Through email: ernest@epchan.com   Through my blog: epchan.blogspot.com   Through my website: www.epchan.com        ...
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How to start a hedge fund quant trading business by Ernie Chan

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How to start a hedge fund quant trading business by Ernie Chan
Popular author present to our Meetup.com/quant-finance
Get more info at http://quantlabs.net/blog/2012/11/how-to-start-a-hedge-fund-quant-trading-business-by-ernie-chan-microsoft-powerpoint-free-download/

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  • How to start a hedge fund quant trading business by Ernie Chan

    1. 1. Ernest Chan, Ph.D.QTS Capital Management, LLC. 1
    2. 2. B.Sc. (Physics, U of T) Ph.D. (Physics, Cornell) IBM Research (Statistical pattern recognition, NY, 1994) Morgan Stanley (Data mining, NY, 1997) Cumulative Profits = N/ACredit Suisse (Stat Arb, NY, 1998) Mapleridge Capital (Futures, Toronto, 2002) Millennium Partners (Stat Arb, NY, 2003) Maple Securities (Stat Arb, NJ, 2003) Cumulative Profits < -$2MME.P. Chan & Associates (Everything, Toronto, 2006) EXP Capital Management (Everything, Toronto/Chicago, 2008) QTS Capital Management (Forex, Niagara-on-the-Lake, 2011) Cumulative Profits > $2MM 2
    3. 3.  Quantitative Trading blog epchan.blogspot.com, 2006). “Quantitative Trading” book published by John Wiley & Sons, 2008. Ongoing workshops in London, Hong Kong, Singapore. 3
    4. 4. “10,000 hours of practice is required to achievethe level of mastery associated with being aworld-class expert” – Malcolm Gladwell1998-2007: after about 10,000 hours oftrading research and practice, I finally reachedconsistent profitability! 4
    5. 5.  Learn from others: ◦ Blogs, books, papers, magazines, online forums ◦ Partners, clients (!), spouse (!) ◦ Readers (!) ◦ Workshop participants (!) Emotional detachment from daily profits. Look for fundamental principles of financial markets ◦ E.g. mean-reversion and cointegration, seasonality at different time scales, Kelly formula, linearity, etc. 5
    6. 6.  Most importantly: “Make things as simple as possible, but not simpler” -Albert Einstein 6
    7. 7.  Ideas generation ◦ Mainly from the aforementioned sources! ◦ The easiest part! Backtesting ◦ Choose a suitable platform for yourself. ◦ Be aware of numerous pitfalls such as data snooping bias, look-ahead bias, survivorship bias, noisy/erroneous data, etc. Paper trading ◦ Which platform allows you to fully automate? 7
    8. 8.  Live Trading ◦ Always starts small. ◦ Position sizing, capital allocation, and risk management using Kelly formula. ◦ Beware of execution costs. Continuous improvement and refinement of strategy. ◦ Improvement in strategy and/or execution technology. ◦ Can have dramatic impact on returns and Sharpe ratio! 8
    9. 9.  Your own savings should be the seed capital. ◦ No pain no gain! Friends and family? ◦ Would be better if they are familiar with trading. Proprietary trading firms ◦ May impose too many restrictions. ◦ May not allow full automation. ◦ May be a good source of start-up capital. ◦ Profit share goes from 10%-100%. 9
    10. 10.  Starting your own fund. ◦ Aforementioned PR is very helpful. ◦ Investors always approach me, never the other way around. ◦ Finding a good lawyer is important. 10
    11. 11.  Through email: ernest@epchan.com Through my blog: epchan.blogspot.com Through my website: www.epchan.com 11
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