Trading work - first statistical results, but early days

I have just about enough trade data to make it worthwhile setting up the spreadsheets that will generate the first stats on my proposed methodology. Before starting properly, I have to set one or two main parameters and make one or two conceptual decisions. For instance, questions like what use to make of overnight data, whether there is an obvious MAE for winning trades, whether there is a possible MFE for winning trades, whether open positions should be carried overnight or closed at some fixed point in time. And so on. I have enough data to give preliminary answers to all these questions, but these will not be very robust for another few weeks (and then not great).

Two books on trading arrived in the post this week; Lindsey and Schachter's How I became a Quant, which is a bit disappointing, and Narang's Inside the Black Box, which is much better and is providing an excellent framework for developing the right questions that I need to be asking. I have also been reading some of the books from my existing library; Gary Smith's rather odd How I trade for a Living and one of my all time favourites, Bass's The Predictors. Years ago, I emailed Doyne Farmer (who is one of the main characters in The Predictors) to ask him about a couple of his academic papers and much to my surprise, he sent me hard copies of three of them - Market Force, Ecology and Evolution, Physicists attempt to scale the ivory towers of Finance and Evolution and Efficient Markets. The Predictors was such an exciting book to read when I was starting my hedge fund company. I look back with many fond memories of that time.

An abstract of a Doyne Farmer paper on financial markets

Another person I have been reminded of recently is Victor Neiderhoffer. I wrote to him in the spring of 1998 and I remember Linda being somewhat surprised to receive a phone call from him one afternoon as I was driving home from work! Something in my letter had caught his attention (probably comments about my father which rather gelled with his own comments in Education of a Speculator). The upshot of this was that he and his wife of the time, Susan, took me to dinner at the Four Seasons restaurant in New York - the one with the Picasso paintings on the wall. I don't remember much about the dinner except that he was walking very stiffly - perhaps a long-term legacy of his squash playing days - and that I felt totally out of my depth talking to him. He sent me a pack of papers related to the checkers player Tom Wiswell, and a signed copy of Philip Carret's The Art of Speculation, for which he had written the foreward. And a video of him lecturing on the subject of music and the markets. I gave him an Arvo Part cd when we met!

A week or two later he sent me a letter saying that all my ideas about markets were wrong - a very aggressive letter made all the more poignant by his fund explosion a month or so later! A few years back he did return to fund management but I understand that this fund also collapsed. Now he seems to be mainly active on a website called Daily Speculations. He has also remarried

I actually didn't come across Neiderhoffer again through market work, but rather through a book I bought a month or so ago called At Home with Books, where various people showed off their libraries, Neiderhoffer being one of them. His looked very nice.

A painting of Victor Neiderhoffer in very much his favourite style!

And on a completely unrelated matter, one of the weekend newspapers has a small feature on the photographs of Yoshihiko Ueda of the Quinault Rain Forest in Washington state. Quite breathtakingly beautiful I thought - some examples below

Not dissimilar from some of my photos - only much better!