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/

1. Ernest Chan, Ph.D.
QTS Capital Management, LLC.
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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/A
Credit Suisse (Stat Arb, NY, 1998)
Mapleridge Capital (Futures, Toronto, 2002)
Millennium Partners (Stat Arb, NY, 2003)
Maple Securities (Stat Arb, NJ, 2003)
Cumulative Profits < -$2MM
E.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
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3.  Quantitative Trading blog
epchan.blogspot.com, 2006).
 “Quantitative Trading” book published by
John Wiley & Sons, 2008.
 Ongoing workshops in London, Hong Kong,
Singapore.
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4. “10,000 hours of practice is required to achieve
the level of mastery associated with being a
world-class expert” – Malcolm Gladwell
1998-2007: after about 10,000 hours of
trading research and practice, I finally reached
consistent profitability!
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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.
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6.  Most importantly:
“Make things as simple as possible, but not simpler”
-Albert Einstein
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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?
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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!
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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%.
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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.
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11.  Through email: ernest@epchan.com
 Through my blog: epchan.blogspot.com
 Through my website: www.epchan.com
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