Quant trading
Part 6 of 6: Statistical Arbitrage for Independent Traders Previously: At its simplest, stat arb is a bet on convergence: two related stocks drift apart, and you bet on them coming back together. Pairs trading is the canonical version of that bet, but it’s wasteful for a solo operator. Triangulated Stat Arb builds a clean
Quant trading
Part 5 of 6: Statistical Arbitrage for Independent Traders Previously: Last time, I showed you a pattern in energy spreads and asked what it meant. The answer seemed obvious: XOM is the outlier. Every spread involving XOM is stretched. The spreads not involving XOM are near zero. But on this seemingly obvious map of mispricings,
Quant trading
From Pairs to Portfolio Part 4 of 6: Statistical Arbitrage for Independent Traders Previously: Pairs trading remains a feasible approach for the indie trader. But, as we saw last time, there are inherent limitations. Trading both legs eats a lot of buying power and limits the number of pairs you can trade. Trading only the
Think like a trader
Why the path to making money in trading runs through work you’d better find interesting Data mining and vibe quanting are essentially the same thing. Both fundamentally and philosophically. Fundamentally, data mining says: “I’ll try enough rules until something sticks.” Vibe quanting says: “I’ll get AI to try enough rules until something sticks.” Same thing,
Think like a trader
Someone asked me recently whether strategies based on mean reversion, trend following, and momentum are “good” or just data mining. It’s a reasonable question, but it reveals some confusion that arises from mixing up two things that sound similar but are very different. Mean reversion, trend, momentum: these aren’t edges. They’re labels for how prices
Think like a trader
My last two articles on AI and trading research got more engagement than almost anything I’ve written. “More of the Disease, Faster” argued that LLMs can’t answer the critical question: who pays you and why? “AI Will Create Millions of Quants” went deeper on the why: AI makes beautiful backtests trivially easy to produce, which means
Think like a trader
(Most of Them Will Lose Money) AI makes it easier than ever to build trading strategies. Prompt a model, run a backtest, optimise some parameters, and suddenly you’ve got a beautiful equity curve staring back at you. It feels like progress. It feels like research. I wrote recently about how AI coding assistants tend to
Think like a trader
This week I discovered the “vibe quant” movement (or rather, it discovered me). People using LLMs to find trading strategies, validate them, and put them into production. The pitch is seductive: the LLM reads the literature, implements the ideas, backtests them, and you just supervise. I think this approach is going to cost people a
Think like a trader
The four hats of the solo trader At a trading firm or fund, the researcher doesn’t run the execution desk. The portfolio manager doesn’t build the tech and infrastructure. These are different jobs, done by different people, with different skill sets. When you’re trading solo, you’re all of those people (and more). And the thing
Trading strategies
Part 3 of a series on Statistical Arbitrage for Independent Traders Previously: In the last article, we built up a conceptual understanding of universe selection: how to find pairs that diverge and converge in a tradeable way. We talked about measuring the thing you actually care about directly, rather than reaching for statistical tests like
Trading strategies
Previously: A Tale of Two Prices (the core idea of stat arb) Last time we established that stat arb is really about betting on divergence/convergence behaviour continuing. Two things that have historically moved together come apart, and you bet on them coming back together. Remember the forced flows example, some fund or whatever having to
Trading strategies
Part 1 of a series on Statistical Arbitrage for Independent Traders. It was the age of wisdom, it was the age of foolishness… I’ve seen heaps of stuff published online about stat arb lately. Some genuinely good takes. And some other material that, while academically interesting, isn’t particularly useful for people like me and the
Quant trading
Quant trading
Quant trading
Think like a trader
Think like a trader