Automated and algorithmic trading


Every time I teamed up with a trader in an automated trading venture, their trading strategies and ideas ended up not working despite the fact that they had been previously successful often remarkably successful as either floor or screen traders. This usually meant that I had spent a year or more of my time coding up a state-of-the-art trading platform that amounted to nothing. I'm not entirely convinced that it's all that possible to beat the market consistently, much less using algorithms, much less using self-learning algorithms AKA data mining.

From my perspective, buiding something that some number of people would be willing to pay for seems to be a much more tractable problem to solve.

That said, I do think it "might" be possible to beat the market algorithmically if you had all the right pieces in place, the trick is just figuring out what those pieces might be. If you spend years working on an automated trading project usually in total secrecy and it doesn't work out in the end, it can be hard to leverage that expertise for anything else.

This is what I refer to as increasing your luck surface area. By building web and mobile applications, you're at least "attempting" to create value for the world and not just yourself. This may seem like a minor point, but if your trading venture doesn't succeed financially, you can't even fall back to the - "well, at least I made a lot of people happy, more productive, etc.

Plus, the thrill of having a large number of people use your software is something you'll never experience within the confines of an automated trading operation. Trading is extremely stressful even if it's the machine itself that's doing the trading. In fact, I read a scientific study a while back that found that a losing trade is twice as psychologically draining as the equivalent winning trade is psychologically reinforcing, which basically means that you're generally going to be operating at a psychological deficit at the end of every work day.

I know a lot of startup founders like to talk about how hard startups are and about the incredible roller-coaster ride that is the startup life which is true , but I got news for you, it doesn't compare to the grinding, gut-wrenching stress of trading, and frankly that's no way to live. Please see addendum I've done a lot of the trading thing and while it's a fun and addictive game for sure, I found that traders are generally not my kind of people. This usually meant that I had spent a year or more of my time coding up a state-of-the-art trading platform that amounted to nothing.

I'm not entirely convinced that it's all that possible to beat the market consistently, much less using algorithms, much less using self-learning algorithms AKA data mining. From my perspective, buiding something that some number of people would be willing to pay for seems to be a much more tractable problem to solve. That said, I do think it "might" be possible to beat the market algorithmically if you had all the right pieces in place, the trick is just figuring out what those pieces might be.

If you spend years working on an automated trading project usually in total secrecy and it doesn't work out in the end, it can be hard to leverage that expertise for anything else.

This is what I refer to as increasing your luck surface area. By building web and mobile applications, you're at least "attempting" to create value for the world and not just yourself. This may seem like a minor point, but if your trading venture doesn't succeed financially, you can't even fall back to the - "well, at least I made a lot of people happy, more productive, etc.

Plus, the thrill of having a large number of people use your software is something you'll never experience within the confines of an automated trading operation. Trading is extremely stressful even if it's the machine itself that's doing the trading. In fact, I read a scientific study a while back that found that a losing trade is twice as psychologically draining as the equivalent winning trade is psychologically reinforcing, which basically means that you're generally going to be operating at a psychological deficit at the end of every work day.

I know a lot of startup founders like to talk about how hard startups are and about the incredible roller-coaster ride that is the startup life which is true , but I got news for you, it doesn't compare to the grinding, gut-wrenching stress of trading, and frankly that's no way to live. Please see addendum I've done a lot of the trading thing and while it's a fun and addictive game for sure, I found that traders are generally not my kind of people.

The reason for this I think is that for most traders it's pretty much all about the money, and whenever anything is all or mostly about the money, it ends up having no soul.