The ten-year cycle of innovation in Trading

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The ten-year cycle of innovation in Trading qplum.co

Ten year cycle of innovation in trading

By Gaurav Chakravorty

Ten year cycle of innovation in trading

The next ten years are going to be about deep learning. We show what happened in the past and what were the business drivers, and how the business drivers are converging behind making investing a utility powered by Deep Learning

8 years ago
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Gaurav Chakravorty

My dream is to make investing a science ... not a competition, but a truly inclusive process. The way I think we can come together to achieve that is to make investment management more (1) Thorough (2) Efficient (3) Transparent. Means: A.I and Tech

gauravchak

Information Speed Short term	These trades work most of the time. They make a little bit of money, when they do. They are consistently profitable but not very scalable.
Structuring Stat-Arb Lead/Lag Medium term	Works a fair bit of the time. Works particularly well when volatility and risk in the market is low. Reasonable scale, about 3% to 5% of annual alpha.
Prediction View-based Long term	These trades are typically very few, but when they work, they are very big winners. This is traditionally what Global Macro firms place bets on.

The ten-year cycle of innovation in Trading

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1987, 1997, 2007, 2017?

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What led to Trend Following in 1980s?

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Futures market

Worked before the 1987 crash, during the crash, and after crash.

Technology was just right for this trade.

What led to Stat-Arb in late 1990s?

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Efficient borrowing and leverage of stocks.

Trend Following was implemented at such scales that it led to opportunities.

Stat-Arb worked well before the dot-com crash, during the crash, and after crash.

Technology was just right for this trade.

What led to High Frequency Trading in 2000s?

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Over crowding in the Stat-Arb strategy.

Rise of ETFs and index futures.

The first purely machine-learning trade.

Fierce competition from exchanges - rebates

1987, 1997, 2007, 2017?

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Information

Structuring

Prediction

Ten year cycle of innovation in trading

Ten year cycle of innovation in trading

Gaurav Chakravorty

The ten-year cycle of innovation in Trading

qplum.co

Ten year cycle of innovation in trading

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