> My only concern about empowering individual investors is that when you invest as an individual, you are entering the fieriest, gladiatorial arena ever invented and you’re competing with highly incentivized participants around the world who are out for your lunch and going to eat it if you don’t have an edge.
It seems profits are possible with technical trading; it's just that they're zero sum, and there are extremely few (although big) winners.
This numberphile video gives an interview with someone who was successful at it:
Quantitative trading != technical analysis. They couldn't be more different.
A quant trader analyzes real world events, both inside and outside the market, to predict stock prices. This is a proven and successful strategy, and in some ways it is essentially automating what people already do with fundamental analysis, just getting an edge by being faster.
Technical analysis involves looking at a single data point – the past price and volume of a stock – and making a future projection.
When a company releases an earnings report a quant algorithm will analyze it and make trades before you can even click on the link. A technical analyst deems the earnings report useless. Where the stock will go depends on how it has traded for the last N periods, nothing else.
>A quant trader analyzes real world events, both inside and outside the market, to predict stock prices. This is a proven and successful strategy, and in some ways it is essentially automating what people already do with fundamental analysis, just getting an edge by being faster.
You're being very loose with language here, to the extent that your entire point is suffering.
Systematic Market Trading (the sole strategy of the RenTech and Two Sigma's of the world) is almost exclusively trading on systematic market data that is largely neutral to the underlying tickers. Sure, they'll do some Alpha Factor modeling in some trades, but look at the CV's of the people that work at those shops and you'll see people talking about modeling momentum, crowding, pairs, etc.
Speed matters in the sense that you're operating in an adversarial market, but plenty of quants just have better ideas (I think you're confusing market-making HFT with quant - they're related but separate things)
Fundamental analysis is a completely different ballgame where the ticker does matter. These are the Citadel Equities, Tiger, Coautes, etc. of the world that emphasize the value of a human stock picker over all else (they have small quant trade execution teams, but it's a rounding error in terms of headcount).
>Technical analysis involves looking at a single data point – the past price and volume of a stock – and making a future projection.
If this is how you define TA, then sure, that's not what Systematic Trading is, but that's not how most people define TA (The most common example of TA is a form of momentum trading).
>When a company releases an earnings report a quant algorithm will analyze it and make trades before you can even click on the link. A technical analyst deems the earnings report useless information. Where the stock will go depends on how it has traded for the last 3 years.
This is a gross mischaracterization. Some quants do NLP and sentiment analysis, but that is a small part of the landscape.
Do we know for sure he doesn't mean technical analysis? When discussing his strategy (6m 30s) he says:
> Looking at the patterns of prices, I could see that there was something to study, maybe some ways to predict prices mathematically and statistically.
And shortly after he speaks of doing way with 'the fundamental stuff'. And also:
> Gradually we found more and more anomalies, and you put together those anomalies and you get something that predicts pretty well.
Every trading strategy involves looking at the past price of a stock. Technical analysis involves looking at the past price and nothing else. That's quite literally the definition. Everyone is going "oh you can do that but also do XYZ other things". Well sure, but at that point it isn't technical analysis.
Technically (no pun) technical trading is looking at historical prices and volumes. But that's not really important.
I guess you're right and I misinterpreted the comments made in the video to mean he finds mathematical patterns in the price/volume data. But now I revisit that evaluation I think it's almost certainly wrong; he almost certainly would use other data too (I mean, why not use everything available to you). It makes sense that he's probably using many, many other data sets and not relying on price/volume alone, and hence it's probably (almost certainly) not technical analysis.
> My only concern about empowering individual investors is that when you invest as an individual, you are entering the fieriest, gladiatorial arena ever invented and you’re competing with highly incentivized participants around the world who are out for your lunch and going to eat it if you don’t have an edge.
It seems profits are possible with technical trading; it's just that they're zero sum, and there are extremely few (although big) winners.
This numberphile video gives an interview with someone who was successful at it:
https://www.youtube.com/watch?v=gjVDqfUhXOY
[1] https://tim.blog/2018/06/22/the-tim-ferriss-show-transcripts...