A couple of years ago I had been working at a quant hedge account with the glorious job name of Head of Fundamental Trading Models. It seems grand I know, but it was just three of us: me, a mad Canadian man and a madder Italian guy; augmented with some poor interns sometimes.
When we weren’t building and handling trading strategies we used to amuse ourselves with turf wars with the top of Technical Trading Models, and his merry band of rocket scientists. So which is way better? Systematic trading strategies differ in the foundation of data they use, using either technical or fundamental information. Strategies that are technical use only prices as an input.
Technicians believe that all necessary information has already been impounded on the market price, and other inputs are futile. Non price, fundamental data, comes in two main tastes. Micro data is approximately a specific asset, for example the produce of a particular bond or the purchase price Earnings ratio of a companies stock.
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Macro data is approximately entire economies and could include inflation or GDP development. There are forecasts available for many types of fundamental data also. It’s time for the big head to head: Technical vs Fundamental systematic trading systems. Who’ll be victorious? A cost is got by us. It might be a little dodgy Sometimes, but given an estimate of typical variability of price between collection points, we can setup simple automated filters that will catch unexpected moves.
We get a cost. And a lot of other stuff. So easily have 10 variables for each device I’m trading, i need to gather 10 times as much data then. Per month checking each one of the 50 plus futures contracts I trade Right now I spend about two minutes, or roughly five minutes a day altogether (basically when the aforementioned filters are triggered).
Do I must say i want to make that 50 minutes each day? When would I’ve time to view TV? Technical 1. Fundamental 0. First blood to the chartists! It’s a price. Unlike certain other financial factors, which will stay nameless, exchanged prices are hard to manipulate or generally muck about with mostly. Well okay, there are a few games you can play, however they don’t move prices enough to earnestly interfere with the signal of the trading system.
Anyone who feels that accounting data can not be manipulated must browse the Smartest Guys in the Room, at least double. Economic data is probably fairly okay, in least in developed countries. But it can be biased. Technical 2. Fundamental 0. The specialized guys are actually displaying their quality. Even if you have no money you can get a price with a 15 minute delay clear of at least 8 million websites on the internet. If you are prepared to stump up for a live feed, or you’re broker will give you one in trade for the huge amounts of percentage you are paying them, you can get a price within milliseconds.
And when you have the price, it is not going to get changed. And within a small percentage of another of getting it, you can get a fresh price (well it might not have moved, but in principle you can get a fresh one). Sorry you are going to need to wait around sir, it’s only quarterly.