Ernest P. Chan's "Quantitative Trading" - Best book for starter ?

Author's got mad quant cred: PhD in Physics at Cornell, worked at IBM's Watson Center and BBs. However, man dedicates the topic of his book to individual day-trading; dude is humble and super instructive, even pointing out things like how to download and align data ...

So, monkeys, discuss ? Recommendations ?

 

Great book. But for quant day-trading. So it wouldn't help much for hft or prop shop interviews. Does have good section on back-testing though.

Also he brushes off alpha generation. He even says its easy to find a good strategy to test. Never really discusses how to trade.

Probably most useful for experienced traders who have a quant idea for their PERSONAL portfolio but no idea how to implement it.

 
couchy:

Also he brushes off alpha generation. He even says its easy to find a good strategy to test. Never really discusses how to trade.

At the beginning, he actually said that was the easy part. Trade ideas are available in abundance at forums, magazines, articles ... However, it's the successful trader who needs to put his twist on the ideas to generate a money-making machine.

Nobody wants to work for it anymore. There's no honor in taking the after school job at Mickey D's. Honor's in the dollar, kid.
 
nonTargetChimp:
couchy:

Also he brushes off alpha generation. He even says its easy to find a good strategy to test. Never really discusses how to trade.

At the beginning, he actually said that was the easy part. Trade ideas are available in abundance at forums, magazines, articles ... However, it's the successful trader who needs to put his twist on the ideas to generate a money-making machine.

Right, I don't find that true though. It's NOT even easy to find someone who'll share a failed strategy.

 
Best Response
couchy:

Right, I don't find that true though. It's NOT even easy to find someone who'll share a failed strategy.

You maybe right on this however, writing a book that disseminates lucrative ideas at the moment doesn't seem to be a good idea to me even if the author wants to do so because it'll be outdated very soon after. The guy seems to be earnest in what he wrote to me (no pun intended) and he did disclose what he thought is a good trading model (simple, straightforward, having few variables etc.)

If trade ideas are really so hard to find in public domain, I guess we could only find them in our own circles then..

Nobody wants to work for it anymore. There's no honor in taking the after school job at Mickey D's. Honor's in the dollar, kid.
 
Brady4MVP:
I exchanged e-mails with Ernest a few times. Seems like a nice guy.

Is there a pdf download available? My group does intraday equity stat arb, so I imagine that this book could be helpful.

Yes, he also runs his own blog. Just pm you link to a downloadable pdf. However, if you like him why don't you buy his book ..

Nobody wants to work for it anymore. There's no honor in taking the after school job at Mickey D's. Honor's in the dollar, kid.
 

I actually was fortunate enough to meet Ernest Chan at a quant hedge fund conference last summer. I was shocked by his humility and both of us clearly stood out in the conference room as we were both dressed casual in an event that mandated a formal dress code- I was wearing a juxtaposed combination of plaid shirt, black shoes and jeans as I was completing a prop trading internship that had a casual dress code and Ernest was wearing a Hawaiian beach shirt and pair of shorts. It may be no surprise that Ernest sat right beside me, and as the conference progressed I lost all interest in the babbling long/short fundamental portfolio managers that were speaking and I was truly inclined towards starting a conversation with Ernest regarding his background. In the end, I unfortunately just introduced myself, had a short word with him complimenting his blog and book, and requested him to sign a copy of 'Hot Commodities', a book I was reading at the time. Having read his book (highly recommended for any prospective trader) and his insightful blog, the only thing that I disagree with is his emphasis on having a high sharpe ratio over everything else. He had even once approached Steve Cohen with his stat arb system that had quite a high sharpe ratio, however SAC decided not to implement the system due to it's inadequate returns, to which Chan responded with something along the lines of "just leverage things up to amplify returns, dude. The abnormally high sharpe will take care of the rest." Perhaps he never said 'dude', but I hope you get the idea.

Also, please don't call Ernest Chan a 'day-trader'. That simply does not do justice to his short term stat arb trading style, especially since he traded at Credit-Suisse's prop desk and a few hedge funds, not to forget the research work he conducted for IBM's Watson.

 
Macro Arbitrage:
He had even once approached Steve Cohen with his stat arb system that had quite a high sharpe ratio, however SAC decided not to implement the system due to it's inadequate returns, to which Chan responded with something along the lines of "just leverage things up to amplify returns, dude. The abnormally high sharpe will take care of the rest." Perhaps he never said 'dude', but I hope you get the idea.

That matches my imagination of him when reading his book. And he mentioned that event at SAC in the book too though he did not find the comeback for the argument right at the meeting.

Maybe I get it wrong but he also said that none of his advanced quantitative knowledge (stuffs at PhD Physics level or voice-recognition algo and such) helped him in his time at BBs and HFs (in his words "losses after losses as far as the eyes can see") Then he quit the financial industry in frustration and stick to the basic stuffs (that a smart high schooler could understand) in his personal trading.

I don't know what he is doing now but at the time he was writing his book, he was actually working as an independent day-trader and the whole book is dedicated to individual quant trading with personal account as low as 50k.

Nobody wants to work for it anymore. There's no honor in taking the after school job at Mickey D's. Honor's in the dollar, kid.
 

I think the intention of the book was to dispel the preconceptions of quantitative trading by making it accessible to computer savvy Art History majors. Regardless, Chan held several senior quant roles at a few prominent quant hedge funds after his 'retirement' and I'm confident his role would have undoubtedly demanded a level of mathematical sophistication well beyond what he covered in his book.

 
Macro <span class=keyword_link><a href=/resources/skills/trading-investing/arbitrage target=_blank>Arbitrage</a></span>:
I think the intention of the book was to dispel the preconceptions of quantitative trading by making it accessible to computer savvy Art History majors. Regardless, Chan held several senior quant roles at a few prominent quant hedge funds after his 'retirement' and I'm confident his role would have undoubtedly demanded a level of mathematical sophistication well beyond what he covered in his book.

True. As I said his quant cred is undoubtable . However, some would want to follow the institutional trading route, some want to go independent, you can't really argue with that. And my heroes in investment (Buffett, Peter Lynch, Soros..) aren't even quants. Speaking of Art History major, isn't Michael Lewis one ? Remember he became a BSD after only 2-3 years at Solomon.

Nobody wants to work for it anymore. There's no honor in taking the after school job at Mickey D's. Honor's in the dollar, kid.
 
wallstreetballa:
watersign:

the great thing about trading is, it doesnt matter how educated you are. how smart, persistent, social intelligence level means alot more

How does social Intelligence give someone an edge....?

i think 'street smart' people make good traders. those who have strong intuition

alpha currency trader wanna-be
 

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