The upshot here is that the more regularly you want to realize profits and generate income, the shorter your holding period should be.

However, if the strategy is a long–short dollar-neutral strategy (i.e., the portfolio holds long and short positions with equal capital), then 10 percent is quite a good return, because then the benchmark of comparison is not the market index, but a riskless asset such as the yield of the three-month US Treasury bill (which at the time of this

No, the difficulty is not the lack of ideas. The difficulty is to develop a taste for which strategy is suitable for your personal circumstances and goals, and which ones look viable even before you devote the time to diligently backtest them. This taste for prospective strategies is what I will try to convey in this chapter.

Finding a trading idea is actually not the hardest part of building a quantitative trading business. There are hundreds, if not thousands, of trading ideas that are in the public sphere at any time, accessible to anyone at little or no cost. Many authors of these trading ideas will tell you their complete methodologies in addition to their backtest

Despite our luck with the longevity of some of the strategies I described, most arbitrage opportunities eventually fade away—the notorious alpha decay that professionals like to lament. Alpha decay can be due to competition—too many people trading the same strategy, but equally often it is due to regime shift caused by market structure or

Also included is a discussion on why loss aversion is not a behavioral bias, which is opposite to what I previously believed. It stems from a profound mathematical insight that threatens to upend the economics profession.

Chapter 3: Extensive changes on MATLAB code that remove a major bug, and new commentary and codes for Python and R. Description of some new quant trading platforms. One item of particular interest: I discuss a mathematically rigorous way to decide how much backtest data and how long a paper trading period is needed. Another mathematical technique

Most ready-made strategies that you may find in these places actually do not withstand careful backtesting. Just like the academic studies, the strategies from traders' forums may have worked only for a little while, or they work for only a certain class of stocks, or they work only if you don't factor in transaction costs. However, the trick is

on metalabeling – i.e., finding the probability of profit of your own simple basic trading strategy, and not to use it to predict the market directly. Why?