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Algorithmic Trading: 101 Trading Ideas

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You are ready to write your first trading algorithm, the only thing you are missing is a great trading idea? Henry Carstens is quant and author of the brand new book '101 Trading Ideas'. He will talk about the creative part of trading algorithm development. Watch the webinar here: https://quantiacs.com/For-Quants/GetStarted/Quant-Tutorials/Videos.aspx

Published in: Economy & Finance
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Algorithmic Trading: 101 Trading Ideas

  1. 1. Presented by Henry Carstens © Henry Carstens www.henrycarstens.com
  2. 2. Creating Trading Ideas for Q6 Quantiacs Q6 Algorithm Trading Competition • Entry Requirement: Futures Trading Algorithm • Submission Deadline: July 31, 2016 • Simulation Period: 3 Months • Winner Announcement: November 2016 • Guaranteed Investments: $1 million, $750,000, and $500,000 © Henry Carstens www.henrycarstens.com
  3. 3. Creating Trading Ideas for Q6 © Henry Carstens www.henrycarstens.com What will win the Quantiacs Q6 Competition? An Idea!
  4. 4. Creating Trading Ideas for Q6 © Henry Carstens www.henrycarstens.com “The most neglected area of development among traders is creativity. We focus on executing trades and managing risk, but rarely work on expanding our creative capacity to generate ideas.” —Dr. Brett Steenbarger
  5. 5. Creating Trading Ideas for Q6 Agenda & Objectives Objective: • Learn how to create unique trading ideas Q&A • Answer your questions about trading ideas • Let’s hold questions to the end © Henry Carstens www.henrycarstens.com
  6. 6. Creating Trading Ideas for Q6 Henry Carstens 20+ years as a quant, strategy developer, portfolio manager, and proprietary trader Degrees in mathematics, economics, and physics Author of 101 Trading Ideas: A Magical List For Fast-Paced Alpha Hunting Email: hcarstens@henrycarstens.com © Henry Carstens www.henrycarstens.com
  7. 7. Creating Trading Ideas for Q6 Idea Trading Strategy Trading Rules Test Alpha? Submit © Henry Carstens www.henrycarstens.com Idea Hunt: from Idea to Alpha to Q6
  8. 8. Creating Trading Ideas for Q6 Scan, Pause, Idea… Scan, Pause, Idea… © Henry Carstens www.henrycarstens.com “The way to get good ideas is to get lots of ideas and throw the bad ones away.” —Linus Pauling
  9. 9. Creating Trading Ideas for Q6 © Henry Carstens www.henrycarstens.com First Step: Get a Lot of Ideas! The Game of Telephone The List The Ideas
  10. 10. Creating Trading Ideas for Q6 © Henry Carstens www.henrycarstens.com • 101 impersonal trading ideas that trigger user-specific trading ideas, from impersonal ideas to rich, robust personal ones. • Triggered ideas contain the user’s unique knowledge, experience, and intuition. • The list can be used by anyone, from novice to veteran, to generate unique trading ideas. • The list can generate ideas in any timeframe and in any market. • There are 17 fully disclosed example strategies in the book and on the website that would make great starter strategies for you own alpha hunts.
  11. 11. Creating Trading Ideas for Q6 1. Trade the path to the outcome. Trade the path to the outcome, not the outcome itself. Trade standard deviations instead of price. 2. Trade a relationship. Build tools to identify when relationships are ebbing and flowing. Buy strong relationships and sell the weak ones. 3. Trade randomness. Is there a time of day that seems particularly aimless? Trade the randomness of that time of day. 4. Trade tomorrow. Where is the most information for tomorrow? How do you put it to work? 5. Trade a recurring event. A recurring event can be either a fundamental or a seasonal event. The Weekly Petroleum Status Report and the Monthly Employment Situation Report are examples. © Henry Carstens www.henrycarstens.com 6. Trade an orbital or orbit. Is an electron orbital or a planetary orbit similar to price orbits in the markets? Create a chart that identifies regime changes and new price orbits. 7. Trade volatility. Change your style based on volatility. Does more volatility mean more or less trending? What about more or less randomness? 8. Trade already-priced-in. If today’s price is already accounted for, trade what is pricing-in instead. 9. Trade convert prices. Convert all prices to another currency or commodity. 10. Trade retail traders. What are retail traders doing? Are they doing it alone while everyone else is on holiday? Do they have to put the market back when they are done? Some Trading Ideas
  12. 12. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Trade the path to the outcome.” 2) A triggered idea, “What happens after a big move?” 3) This strategy trades big moves in crude oil. © Henry Carstens www.henrycarstens.com
  13. 13. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Trade an orbit.” 2) A triggered idea, “What does the tail of a candlestick mean?” 3) This strategy trades tails of candlesticks in natural gas. © Henry Carstens www.henrycarstens.com
  14. 14. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Trade tomorrow.” 2) A triggered idea, “What is the short term relationship between gold and the 30 year bond.” 3) This 1 day strategy trades that relationship. © Henry Carstens www.henrycarstens.com
  15. 15. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Convert prices.” 2) A triggered idea, “What is the relationship of the price of copper in gold and the price of copper in crude oil?” 3) This strategy trades copper priced in gold and copper priced in crude. © Henry Carstens www.henrycarstens.com
  16. 16. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Find the signal.” 2) A triggered idea, “How do traders position for the Weekly Petroleum Status Report when the prior report created more noise than signal?” 3) This strategy trades crude oil but signal and noise apply to all markets © Henry Carstens www.henrycarstens.com
  17. 17. Creating Trading Ideas for Q6 List, Idea, Strategy 1) List says, “Pantheon.” 2) A triggered idea, “If crude oil and natural gas are viewed as old-world gods, what does a fight between them look like?” 3) The fight is represented by crude oil and natural gas going in opposite directions. Extreme prices denote the climax of the fight, and declining volatility a sign that the gods are getting tired. © Henry Carstens www.henrycarstens.com
  18. 18. Creating Trading Ideas for Q6 © Henry Carstens www.henrycarstens.com Illustration # and Title Win % Average Trade ($) Z-score Profitable Years 1 Crude Oil 1 55 1,880 1.5 9 2 Crude Oil 2 63 510 2.2 8 3 Crude Oil 3 57 230 2.3 8 4 Crude Oil 4 51 250 3.0 9 5 Natural Gas 1 53 291 2.8 8 6 Natural Gas 2 56 326 1.8 9 7 Natural Gas 3 56 574 2.2 9 8 Natural Gas 4 55 676 2.4 7 9 Copper 1 57 206 2.3 8 10 Copper 2 58 498 2.3 9 11 Copper 3 61 1,414 3.1 9 12 Copper 4 51 313 2.6 9 13 Copper 5 80 365 4.0 10 14 Gold 1 55 154 3.0 10 15 Gold 2 67 727 3.0 9 16 Gold 3 59 271 3.2 10 17 Gold 4 67 1,164 2.4 9 17 Starter Strategies from 101 Trading Ideas
  19. 19. Creating Trading Ideas for Q6 Recap - How to Win Q6: • Have Lots of Ideas • Scan, Pause, Idea… • Make Q6 Magic Happen © Henry Carstens www.henrycarstens.com
  20. 20. Creating Trading Ideas for Q6 Q&A “The book you’re about to read is far better than 101 trading ideas. It’s 101 ways to develop trade ideas.” Brett N. Steenbarger, PhD • Contact Info Quantiacs: www.quantiacs.com Quantiacs Idea Code: https://github.com/Quantiacs/HenryCarstens-101-Trading-Ideas Henry Carstens: hcarstens@henrycarstens.com 101 Trading Ideas: henrycarstens.com/101-trading-ideas/ © Henry Carstens www.henrycarstens.com

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