Tag Archives: Fundamental

Quants go to fundamental hedge funds

Quants go to fundamental hedge funds

I wonder why? My courses focus on fundamental techniques for futures/options

http://www.pionline.com/article/20160808/PRINT/308089977/quants-ease-into-fundamental-firms

Join my FREE newsletter to learn more about using fundamental analysis in automated trading

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Why technical analysis don’t make money like fundamental trading

Why technical analyst don’t make money like fundamental trading

Once again, going through my video from UC Davis, goto 8:15 to see the exact explanation

Join my FREE newsletter to see how I use these equations for my automated trading

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

No one listens to fundamental analysis trading

No one listens to fundamental analysis trading

But when I talk about machine learning or making millions with HFT, everyone comes running. Now I know why 80% of ‘retail traders’ are losing !!

Just learning from the web and email stats

Join my FREE newsletter why fundamentals trump any type of other analysis with automated trading

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Understand fundamental of pricing theory of supply demand for commodity future trading

Understand fundamentals of intertemporal pricing theory of supply and demand for commodity future trading

Newsflash! I can say with confidence that fundamental trading is still the optimal way to analyze the markets. For instance, my last topic of Inter-Temporal Pricing Theory could explain expected pricing in the next season of a commodity. From the course that I promote, you could theoretically explain both graphically and mathematically in a simple way. I have yet to see any other resource who does showcase this.

 

See my video here

 

MongoDB open source NOSQL database notes and video playback posted

Well tonight we did it again! We had a LIVE learning session on how to use NoSQL open source MongoDB for your automated trading. I try to highlight all the important items of setting up, importing, and using Python client code to manipulate the data. There is a 2 hour video playback with all the source code available from tonight.

 

Go here to get IMMEDIATE access

 

Next week I’ll be presenting the worlds fastest database called Redis which is an in memory NOSQL database. This is all part of my “Indie Algo Trading Business with Python” course series.

 

See all my upcoming topics here

 

As you know, each topic will be only presented live once as there’s too much in the pipeline to cover.

 

If you’re sitting on the fence now’s the time to join! Here are your highly affordable pricing options:

MONTHLY: $97/MONTH: Click here

6 BONUS MONTH FREE Annual: Click here

BIGGEST SAVINGS with 24 BONUS months: Click here

 

Thanks for reading

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Fundamental analysis outperform quant or machine learning?

Does fundamental analysis outperform quant or machine learning?

There has been a burning question I’ve had for the last number of weeks. It is:

 

Do the returns of quantitative analysis or machine learning exceed simpler fundamental analysis?

 

From the expert reports I have been reading, which there are few, say there is no difference between the two. This begs the question of:

 

Why are highly educated scientists blowing their brains out with these more complicated modelling techniques for performance of simple fundamental?

 

I even made a video about this and lessons learned from it.

 

Learn more about these reports by going here.

Intro overview of MongoDB open source NOSQL database Mar 29

 

Coming up this Tuesday is my one time only topic of the database I’ll be using for my upcoming high speed trading system. Even more confusing with all the database options, this is my solid choice which does meet all the strict requirements for my years invested in research. My database of choice will focus on open source NOSQL MongoDB. Again this will be the only time I’ll be covering this topic live.

 

This database is used throughout my high speed automated trading system so this topic will be a requirement to understand how my trading scripts work.

 

You can get the login details here but realize you have to be a Quant Elite member

 

Here are the pricing options to join:

MONTHLY: $97/MONTH: Click here

6 BONUS MONTH FREE Annual: Click here

BIGGEST SAVINGS with 24 BONUS months: Click here

 

Get more details here my ‘Indie Algo Trading Business with Python’ course series. It is one of many benefits by joining my Quant Elite membership.

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Does fundamental analysis outperform quant or machine learning?

Does fundamental analysis outperform quant or machine learning?

Tough to find reports but looks like the results are the same.

There are no noticeable differences in performance between quantitative and fundamental managers in the value space

http://www.investmentreview.com/analysis-research/quantitative-vs-fundamental-4647

There are no noticeable differences in performance between quantitative and fundamental managers in the value space

 

http://www.hillsdaleinv.com/portal/uploads/Quant_vs_Fundamental_Institutional_Money_Managers.pdf

In fact, investors should combine fundamental investment strategies with quantitative investment strategies to increase their risk adjusted returns since empirical evidence suggests low correlation of returns between these two approaches.

http://articles.economictimes.indiatimes.com/2012-05-03/news/31558848_1_investment-factors-managers

So why implement all these complicated processes that offer the same result or performance? Do these newer skills like quant or machine learn result in wasted if the results are the same?

Join my FREE newsletter to see how I implement fundamentals in to my automated trading

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Oaktree Capital explains the importantance of fundamental analysis

 

Oaktree Capital explains the importantance of fundamental analysis

Most trading fools always don’t understand fundamental. This interview from the found full explains it at the end of this important interview.

As thinks tank, if you don’t get this you will sink with it. Take heed.

http://www.bloomberg.com/news/videos/2016-01-15/enormous-swings-in-manic-depressive-market-howard-marks

Join my FREE newsletter to learn more about proper trading fundamentals

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Automate stock trading systems portfolio based on fundamental criteria?

Automate stock trading systems portfolio based on fundamental criterias?Looking to automate a portfolio of systems that would be based purelly on proprietary fundamental ratios but lack the knowhow, curentlly with IB.
Would really appreciate your inputs on my search for the above, the path would be something like:getting the fundamental datas(balance sheet, cash flow statements and income statements individual inputs) on a daily or weeklly basis, EOD is good enough, then to calculate the universe of sp500 stocks and spit out the resulting symbols that match the criterias then to rank the ones by another proprietary formula based on prop fundamental ratios and to send the market(or limit) orders to the IB broker , the stocks would be held untill in the ranking apears another candidate and would drop the old and get the new one(s)
As mentioned above it would have to be a portfolio of systems based on different criterias and rankings so it would also have to allocate capital for each system equally but some systems would hold more stocks than others.
Is it possible? How?
==I like the algorithms, actually I prefer technical criterias, but anyway if I understand , you want to create a fundamental system in order to know how to balance the portfolio ?, is Yes, you can start to searching databases like www.smartmoney.com, wich have a tool called “Map of market”, take a look,it uses a easy way to show the performance of different enterprises. There are enterprises like CMA(www.cma.com.br) with some kind of this fundamentals tool but specifically for the Brazil markets.
I am going to search my database of this Tools , I will let you know.
–Thank you but not familiar with either of the services you recommended, or how they could help to my goal. Will be waiting for your inputs.
–At least you are asking SOME of the right questions.
Specific advice would depend on your education and background. Didn’t see any listed education on your profile.
Start by getting a degree in accounting and economics (to understand the mechanics of business and finance). Then, develop an expertise doing analysis (qualitative and quantitative). Then, develop an understanding of IT development and systems principles. Then you will be in a position to START developing a computer based stock screening and trading system.
In addition to the formal educational background, it would help if you could log about 30-40 years work experience in analysis (accounting and IT development).
Finally, steal good ideas from those that have succeeded and written books about how they did it. Usually, you should be able to get at least one good idea from each book read.
==I already have the algorithms that are based purely on fundamentals and their rudimentary backtests, the rules are value based and the result of empirical studies done by people a lot smarter than me, you stated correctly that I lack IT knowhow, why would someone post these questions knowing the solution… The backtests are a bit too good to believe and would try to do a forward test of it to check its validity, the automation would take out human error so that the results would concur out of sample, or not. I never stated i’m educated and never will, that is my way of keeping the mind opened to new ideas and possibilities, altho my post may sound over enthusiastic, it is for the simple fact that I enjoy finding it’s rules. Please post your inputs on the matter and spare no leniency, I enjoy challenges and you would keep me where I want to be, deciphering.
==
I’m trying to be helpful with my suggestions.
The process of making money in the stock market is (and has to be) knowledge based. One uses knowledge to narrow the scope of risk assumed with an investment and within that scope to develop a reliable estimate of risk being assumed.
Accounting (and Economics) is the language of business. Mathematics (and Philosophy) is the language of science.
Your instincts about doing a value based analysis are good. After all, if value was irrelevant then what would be the point of trying to guess or rely on earnings and other financial measures. Graham and Dodd (written in the 30s originally) is the bible of the value movement although G&D valuation has been updated with significant new twists first proposed in the late 80s.
Obviously, Black Schoeles developed the standard for valuing options. They got the Nobel prize (in Economics) for their theory. Black Schoeles is still the basic standard but it has been significantly modified. About 7 years ago I did a critique of Black Schoeles to a local Atlanta options trading group. I found the operational details of their model deficient but their overall theory was sound.
A stock’s technical (price/volume) characteristics were first (to the best of my knowledge) broadly summarized by Edwards and Magee in 1966. They didn’t so much invent anything new. Their book just comprehensively brought together a variety of tech analysis methods and gave those methods (and their use) some structure (such as the concepts of support and resistance and trends).
This G&D “chart based” approach has been supplemented by a number of authors who focused more broadly on the underlying principles of technical analysis. “Charting” while still interesting and marginally useful (and its associated methods such as propounded by the MTA out of New York) has essentially been found lacking as a comprehensive technical approach. Now if you want to understand technical aspects of trading you need to have a solid mathematical and econometric background.
It should not be a shock that you need to understand the principles of IT development and systems IF you plan on using computers in your quest for making (rather than losing) money in the trading process.
THERE IS NO SUBSTITUTE in IT for experience ON TOP OF A SOLID education in this subject matter.
Obviously, nobody in their right mind would try to profitably trade in today’s market without using a computer. That would be equivalent to trying to hand write (and/or copy) the Wikipedia website (in toto) with a pencil and paper.
Why is Economics critical? Have you noticed that the same company with basically the same earnings (presumed value) will have a widely fluctuating price DEPENDING on the state of the Economy. Understanding the Economy (it’s operations and principles upon which those operations are built) is the province of Economics. In the final analysis, you care about price if you are trading stocks.
Finally, why philosophy? What aspects of philosophy?
Start with Logic (as a branch of philosophy) and the general practice of deductive reasoning. All mathematical proofs USE Logic principles and methods in their proofs. Epistemology (as another branch of philosophy) is the study of what is Truth. No matter how precise your logical process is it always helps to have that reasoning process based soundly on Truth. Ethics (another branch) is the study of what is right or correct behavior. These qualitative considerations are a critical foundation upon which sounds quantitative measures are built.
I could have added Political Science (the study of power) and Psychology (the study of the mind – mostly human). Both provide useful insights. Engineering (numerous branches) also provide us with mature and useful TOOLS to use in the process of trading.
Finally, one needs experience USING all these academic tools.
==
I and a friend have been working on deveoping similar strategies. We are using two approaches at the moment. Fidelity Wealth Lab Pro and Excel Spread sheets to strip data off of primarily the Yahoo financial web sites. Wealth Lab is a c# and .Net based programmable strategy that can use any available data from the web. If you are not a high level programmer you can begin using their coding rules that include a large number of fundamental indicators. For example my friend programmed a strategy that buys when the Ben Graham fundamental criteria are met and sells when any of those criteria are violated. I have written several excel spreadsheets that analyze the quarterly and yearly financial reports for each company in a stock symbol set and output the results to a table that can be sorted on any of the columns. Both of these approaches, it would seem would help you attain your goal.

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

Quant analytics: A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies

Quant analytics: A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies

What is the difference between black box trading software and a trader that is unable or unwilling to explain how or why they make their trading decisions(i.e. its intuition driven)?

 

==

At the outset they are the same: one is unwilling to show a back-tested edge, and one is not equipped. The first one can be ground-down with the lure of investment, the second cannot. The middle ground is Macro RV: models to help understand the world and a frame work for testing, which can be discussed (in a whisper, but discussed non the less), and an appreciation there is a large vector of qualititive experience that drives the box.

 

==

I can better address: ” A thought experiment, quantitative trading strategies vs traditional/fundamental trading strategies “. Given the advent of high frequency trading, at any given instant the observed price of a stock (for example) reflects “quantitative trading strategies” and not fundamentals. In fact, there is a paper athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1977561 which use Nanex graphics to explain seeming price irregularities in high frequency trading. At the end of the day, traders and orr money managers want to produce alpha. Here again, there is some controversy about who can do it, how, and why. Those issues are addressed athttp://papers.ssrn.com/sol3/papers.cfm?abstract_id=1976082

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!

HFT: Relationship between methods of fundamental and technical analysis. Independent or complementary?

HFT: Relationship between methods of fundamental and technical analysis. Independent or complementary?

I would like to discuss my results of my MBA thesis and exchange ideas. Here is in sum:

“Some traders make investments based only on technical analysis and others based only on fundamental analysis. Others use both of these methods, but independently of one another. This approach was to first find the relationship between fundamental and technical analysis because they could be combined to create better results. The results helped develop an investment strategy that obtained the greatest profitable trades and reduced risk.

First, we found that stock prices are reflected by their financial value over a long period of time. Moreover, we found that the size of the firm is related positively to stock prices over a long period of time. Therefore, both the size of a firm and its financial value are related positively to the increase in stock price over a long period of time.

The next important discovery was the relationship of financial value to the performance of trading systems. We compared the mean and median of each firm category. The mean of the trading performance of large firms was decreasing compared to the firm category having less financial value. This implies a relationship between the large firm category and the performance of the trading systems. However, the exception was small firms with low financial values. The performance of the trading systems of low financial value firms was greater than those with high financial value. This finding does not mean that we should include these firms in our portfolio.

In order to further analyze this relationship, regression analysis was applied to individual firms in the same category. The analysis of price changes and the corresponding performance of trading systems revealed a close relationship between the change in stock prices and the performance of trading systems. This relationship was high for large firms, but in small firms there was only a relationship among firms with moderate or high financial performance. The exception was small firms with low financial performance. This can be explained by its high deviation.

In order to better understand the relationship between fundamental and technical analyses, we analyzed the contribution of technical analysis to the return of investment by subtracting the change (increase or decrease) of stock price. In this case we found that technical analysis contributes more to firms with low financial performance and less to firms with moderate financial value.”

Setup:
• Divide firms (US stocks) into two categories: large capitalization stocks (market value greater than $1.3 billion) and small capitalization stocks (market value less than $500 million).
• Apply three fundamental filters for each category (large and small capitalization companies) depending on their financial performance: companies with high performance (above average industry), companies with middle performance (about average industry), and companies with low performance (below average industry). These boundaries should be clearly distinguished, so that each stock is without a doubt in the correct category.

After selecting the six stock categories, the next step is to use technical analysis concerning the development of trading systems for a specific historical period. The preparation includes the following steps:
• Obtain the list of stocks produced from running the screener and download the stock data from Yahoo.com for January 3, 2005 until May 9, 2008.
• Keep the stock data in a custom database.
• Develop the trading systems that will be used.
Then, apply technical analysis so that the maximum profitable results for the period January 3, 2005 until May 9, 2008 are acquired. In order to produce more reliable results, 12 different trading systems were developed. Each trading system was optimized for each stock;

Hear is some details results:

The Best in Performance Trading Systems

To examine if any relationship between the six categories of companies exists, the best performing trading system was chosen. The next table represents the statistical results:

============================= % Max Performance of Trading Systems
================================= Mean / Median / Stdv / Min / Max
LARGE CAP – HIGH PERFORMANCE—— 303.0 —- 246.2 —- 204.8—82.4—746.8
LARGE CAP – MIDDLE PERFORMANCE– 75.9—- 67.2—- 40.6—-34.5—-200.8
LARGE CAP- LOW PERFORMANCE—— 69.0 —- 54.9—– 47.4—-23.8—-197.6
SMALL CAP – HIGH PERFORMANCE—– 182.4— 121.4—-150.0—-55.1—-665.0
SMALL CAP – MIDDLE PERFORMANCE– 83.6—- 72.7—– 39.9—-31.3—–160.9
SMALL CAP – LOW PERFORMANCE—— 224.6— 90.3—- 574.8—-18.8—2652.6

The following can be observed from the table above:

• In large capitalization firms, the performance of technical analysis is related to the financial value of the firm. When applied, technical analysis brings results that are more profitable for the firms which are stronger financially.
• In small capitalization firms, technical analysis is related to the financial status only for firms with moderate and high financial performance. For the small firms which are financially unstable, the performance of technical analysis is not related to the firm’s financial status. This can be seen by comparing the mean. If there was a relationship, then the firms with low financial performance should have a mean less than 83.6% of the firms performing moderately.
• The standard deviation (Stdv) of small firms with low performance is very high (574.8). This means that the performance of the trading system has various and extreme values relative to the mean.

 

And finally, here, it is displayed the correlation between the performance of technical analysis and firm fundamental strength:

============================ Correlation
LARGE CAP – HIGH PERFORMANCE 0.954
LARGE CAP – MIDDLE PERFORMANCE 0.854
LARGE CAP- LOW PERFORMANCE 0.724
SMALL CAP – HIGH PERFORMANCE 0.924
SMALL CAP – MIDDLE PERFORMANCE 0.608
SMALL CAP – LOW PERFORMANCE 0.069

 

One of the toughest hurdles to overcome in trading system development is form fitting data.

 

I think fundamental analysis and technical analysis is complement each other. In stock investment, can category to fundamental-oriented and technical oriented, but most case they complement each other. For example, long-short funds is checking technical indicators after picking stocks, statistical pairs is filtering pairs with fundamental.

 

The biggest problem I have with your study is the timeframe – it looks like your data starts 2005? This is very little data. During one Kondratieff cycle there are times when certain relationship exists between stock prices and certain parameters – the relationships change during others timeframes. I think that it is dangerous to project relationships that existed during your time period into the future. My personal bias is that we are entering a deflationary period in the next few years and methods that have worked during the previous inflationary/disinflationary cycles will not work.

To give another example during the past few decades one of the best fundamental predictors of future rising stock prices is estimated up revision of earnings – this is done at Zaacks.com. I think this parameter will also fail during the next deflationary phase when all stocks decline.

 

I agree with your comment that data sample (3 years) is not enough to generalize. For each year running the tests, results were almost similar. I have not complete the tests regarding period from 2008-2011 which characterized as recessionary period. It may get similar results.

I presented this for two reasons:

1) First to show that there is a relationship about technical and fundamental analysis regarding performance (profit) and
2) To discuss if the risk of the running trading systems could be connected with fundamental strength of the firm.

 

Fundamental analysis is 98% and technical is 2%. Enjoy!

 

To have opinion in technical analysis (especially the next generation of TA) you must spend a lot time of study…I agree to the point that fundamental analysis plays a significant role to long term investments. But it is not so proper for short time investments especially for HFT. It is well known the conflicting question: Do technical trading rules could be profitable in financial markets? I think that recently most agree that technical trading rules (which are based on past data) could lead to profits.

To sum up, technical and fundamental analysis are not enough to make trading/investment decisions. You need the contribution of other scientific areas such as advance statistics, data mining, behavioural finance, computational intelligenge (Neural networks, GAs, fuzzy logic, etc).

Regards

 


Nice discussion here. When doing fundamental analysis, I usually include at least 5 years of current data (2006-Present), but 10 is best. It’s very important to include March 2009, when the market fell off the cliff. How did technical analysis performed March, 2009, when the Dow was under 6700?

Superior investor will wait for investments to come to you at a reasonable price (March 2009 was a buying opportunity, when everyone was selling). Hence, using fundamental analysis will help control risk. In closing, investing is not brain surgery, it’s quite simple and basic, if you make make it. Enjoy!

 

I respectably completely disagree completely with both your previous comments – to suggest that somehow fundamental is 98% and technical is 2% makes me wonder what your definition of “fundamental” and “technical” is ? this is actually a good question – what exactly do they mean? Is “fundamental” when prices are “cheap” you buy? then what is “cheap” mean? do you rely on P/E ratio? And what exactly is “technical” mean? This is the problem with having discussions like this whereby people use word that mean different things to different people with no concensus. Contrast this to an automated strategy when everything is completey defined.

To suggest that “superior” fundamental investors “knew” that market bottomed in March 2009 is quite ridiculous. I shorted S&P futures beginning Oct 2007 and exited March 2009 and did quite well whereas most long-only “fundamental” investors stayed long and exited around March 2009 – the worst time possible. I used elliott wave analysis for my once a lifetime trade – not any “fundamental” analysis.

 

 

NOTE I now post my TRADING ALERTS into my personal FACEBOOK ACCOUNT and TWITTER. Don't worry as I don't post stupid cat videos or what I eat!