The use of automated trading systems has grown enormously in the past decade. Trading volumes from financial institutions and proprietary trading firms is now driven primarily by computer algorithms. This growth has been driven by the availability of modern technologies, The challenge for traders is how to use the modern technologies to their advantages and to build robust quantitative trading systems.
This course aims to remedy this by providing students who have trading experience a foundational knowledge of systematic trading that will enable them to develop automated trading systems grounded in quantitative finance and risk management principles. Upon completion of this course students will have learned how to design a robust quantitative trading system for a variety of markets and will have developed a working trading system of their own design. They will also have gained ‘real world’ trading knowledge which will further them along their career as a quant trader, analyst or system developer.
Key ‘takeaways’ and topics to be covered in this course
- Develop a working quantitative trading system of your own design;
- Be able to perform in-sample and out-of-sample tests;
- Learn how to properly optimize for stops and profit targets according to market type.
- Employ portfolio and risk management techniques such as position sizing, portfolio optimization, asset and risk allocation;
- Learn advanced trading concepts such as volatility trading, correlation (statistical arbitrage);
- Utilize quantitative methods such as of autocorrelation, cointegration, and variance ratio tests to find statistical edges.
Module 1. Introduction to Quantitative Trading
- Why we should employ algorithmic trading: advantages, challenges, opportunities.
- The history of algorithmic trading and current industry trends.
- Programming languages and platforms
- How algorithmic systems are employed
- Career path and how to prepare for a career: HFT prop, market making firms, HFT hedge funds, macro hedge funds, CTA firms, pension funds, insurers
Module 2. Characteristics of the Markets
- How to characterize a market: trending vs. mean reverting
- Tools used to identify the market types.
- How to quantify market’s volatilities
Module 3. System Design
- Entry system parameters
- Exit system parameters: stop losses, profit target
- Parameter optimization
- System validation: out- of- sample testing, walk forward testing, Monte Carlo simulation
Module 4. Risk Management and Position Sizing
- Position sizing in a single underlying
- Position sizing in a portfolio of multiple underlyings, portfolio of systems: risk parity, volatility targeting
- Portfolio optimization
- Asset allocation / Risk allocation models
Module 5. Advanced Topics
- Advanced strategies: scalping, HFT, stat arbitrage, market making
- Spread trading: correlation, cointegration
- Quantitative methods applied to spreading, options, volatility
Appendix and References
Mathematical concepts: correlation, autocorrelation, cointegration, variance, standard deviation, random process, Monte Carlo simulation
Course length: 30 hours (5 weeks x 6 hours a day)
Course length: 5-10 weeks.
Total class time: 20 hours (2 x 10 classes) + unlimited access to News vs. Noise trader chat room.
Study modules accessible to students via a web-based learning management system and taught online via Skype.
Teaching modules vary from home-study modules to ensure an engaging, interactive class atmosphere.
Classes held in a live trading environment whenever possible.
Student participation such as Q&A, trade review and critique is encouraged since active participation helps ensure effective reinforcement of course material.
Pre-requisite: a basic knowledge of Excel
What comes next?
Upon completion of this course you will have a solid foundation in the 3 pillars of trading: technical analysis, macro-fundamental analysis and risk management and have enough knowledge to confidently execute your trading plan live. At this point, you will also have some idea of your weaknesses, strengths and the trading style that suits you best. Now what?
It is difficult to predict how a trader will evolve from this point on. Some start off like grass fires, become over confident and then blow-up. Others develop far slower and lose their capital through attrition of many small losses. The most successful traders look at trading like a business. They trade according to a plan and look upon trading as a business of managing probabilities. They know markets evolve and that what may have worked before, won’t necessarily work in the future. They know they need to continue learning and always be a step ahead.
To help new traders make the transition from student to professional trader we maintain an online chat room free to all alumni. Our teachers are also all experienced mentors with an average of over 25 years trading experience. We are here for you after graduation. Our suggestion to all graduates of the Master in Trading Core course is to maintain an active presence on our chat room and to continue learning through any of our courses, including: Financial Market Macro-fundamentals, Risk Management and Psychology, and Quant Trading and System Development. You may also decide to specialize in a particular style or product, in which case our courses in scalping or spreading will help you achieve even greater success in your career.