

Trading: a hacker approach? - zygomega
http://hyperq.github.io/blog/trading-a-hacker-approach.html

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VandyILL
I don't think that building slightly faster software and hardware to run other
people's algorithms is really hacking financial trading.

To me, if you wanted to hack the system, you would look at creative approaches
to make the market behave in ways that it is not supposed to.

An example that I'm working on is the idea of an alternate currency where the
deposits are invested in socially responsible / clean energy companies etc.
People would trade their currency via NFC wallets or square equivalents etc.
for goods and services. Meanwhile the investment stays with the same company.

This to me hacks the trading system because it uses private contracts & a
virtual currency to shift the choice about how money is invested to the
consumer & opens up opportunities to make longer sighted investments (that
benefit the economy as a whole & the people using this currency) rather than
just trying to maximize the profits of an investment fund.

From a "computer hacking" perspective, this is just a mash up of different
platforms that have recently developed & using it to create the previously
only dreamed of "indexed currencies" etc.

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lifeguard
Howto hack investing:
[https://en.wikipedia.org/wiki/The_Dogs_of_the_Dow#Results](https://en.wikipedia.org/wiki/The_Dogs_of_the_Dow#Results)

~~~
zygomega
I'm thinking of a much shorter time horizon. The problem with long-term
investing right here and now is that potential possible futures include many
where the long-run risk-asset investor ends up with a big fat zero. Someone,
somewhere will have to cough up and accept massive losses to rebalance the
economy post QE.

~~~
lifeguard
I was being cute. Investing is not trading. Another one of my techniques is to
never sell, as long as the dividend yield is better than what I can get in
bonds.

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beagle3
I share the intellectual curiosity, but, if this thing turns out to actually
work, then it is guaranteed to stopped working shortly after when other people
take note of this.

~~~
zygomega
I hope you're right! Cory Doctorow suggests the main problem for writers is
obscurity not intellectual property theft and I think the same can be said
about about traders. By the time we get successful enough for people to take
notice so that the weight of money destroys the initial edge,, well I think
that's a pretty happy place to find yourself. The trick is to find the next
edge by then. What we're really banking on is that an open-source approach can
obtain results way beyond what you can do initially in walled-off closed-
minded intellectual property cubby holes. And then, that the economics of
being involved in the open-source project contnue to be biased towards
collaboration as opposed to cutting and running with a snapshot. The value
isn't in the code - it's in the process that produces and continues to
innovate the code.

~~~
beagle3
Being a retiree of the trading industry myself (was last involved in HFT in
2007, last at all in 2008) - I believe that's naive.

Every HFT outfit has someone on the lookout for these kind of ideas. When this
system is found, every idea in a commit in an obscure branch is going to be
quickly reviewed, tested inside that outfit's backtest system (which likely
has years of microsecond stamped tick data to test on, and a 1000-core strong
compute cluster to do that quickly), and if it has merit -- applied before you
have a chance to test it in trading yourself.

Your own success in trading this system is not required (and in fact,
unlikely, even if you implement things that would work if done in a non-public
way).

I'm not trying to get you not to do it - on the contrary, I love to follow
interesting ideas in the field even though I'm not in it anymore. I'm just
trying to give my sober, experienced, point of view - if you want it to
succeed, this particular thing has to be closed source - you should only
commit to public git after your edge has waned....

~~~
zygomega
Thanks Beagle, and I appreciate the sentiment and goodwill behind your
comments. I remain optimistic, however irrational that seems. Big Finance is
oriented to Big Data crunch-and-run processes as you describe. A highly non-
linear, inclusive, non-backtested approach can't be even imagined within that
paradigm. With respect to open sourcing,, well I don't think I personally have
a choice. I can't do it all by myself, don't want to work on a 1000-core
backtest platform. But I'm finding lots of talented hackers that share my
views and want to give this a go.

