I'm a OR student and I would like to invest some time to learn "automated trading strategies" based on OR algorithms.

My professor proposed me some thesis about this, and, according with its backtesting, it seems perform very well. So, this convinced me to invest some time learning more about this. Now, my question is: All this thing is just a "gold rush" or, in the real world there are really some hedge funds that use this? I know, that in this field everything is uncertain, but there are someone who really win? Could you provide me something that prove it? Does it worth it investing time on it?

Edit: 2) Someone knows Brokers who allow API access? I have found only "Interactive Broker" but they require $100k to open an account

asked 14 Apr '14, 13:55

x3d0's gravatar image

accept rate: 0%

edited 15 Apr '14, 10:00


Yes OR and automated trading strategies are being used heavily. In financial markets they take the extreme as far as possible to get a head start. Just because there's uncertainty in a market, doesn't mean you should give up :-)

(14 Apr '14, 14:02) Bo Jensen ♦

Thank you Bo Jensen. May you post some articles, reports of Hedge founds that talks about this and their achievements? Just to have something to read. thanks

(14 Apr '14, 14:05) x3d0

I don't think think any hedge fund would reveal any method being used internally, it is my experience they are very protective, but they're all using the same techniques.. :-) Anyway, you can find plenty of books combining OR and finance to give you an overview of the ideas to be used. It's not rocket science once you know the OR part.

(14 Apr '14, 14:11) Bo Jensen ♦

There's a saying on Wall Street. Those who say don't know, and those who know don't say.

(05 Mar '15, 11:12) Mark L Stone

Before you get too excited by backtesting results, read "Pseudo-Mathematics and Financial Charlatanism: The Effects of Backtest Overfitting on Out-of-Sample Performance" by David H. Bailey, Jonathan M. Borwein, Marcos López de Prado, and Qiji Jim Zhu http://www.ams.org/notices/201405/rnoti-p458.pdf .


answered 15 Apr '14, 09:56

Mark%20L%20Stone's gravatar image

Mark L Stone
accept rate: 15%

That reminds me portfolio management class. In class, we did backtesting. We use really simple algorithms, and almost everybody in class was able to beat the market. :)

(15 Apr '14, 10:10) ksphil

Thank you. I read it all. Very interesting

(18 Apr '14, 16:57) x3d0

" That reminds me portfolio management class. In class, we did backtesting. We use really simple algorithms, and almost everybody in class was able to beat the market. :) "

And now they're all broke :)

(30 May '15, 16:18) Mark L Stone

Gerard Cornuejols and Reha Tutuncu, both from CMU have a book covering Optimization Methods in Finance that wasn't mentioned previously. I suppose it depends on what you would consider "automated trading", but their book covers various types of portfolio construction and option pricing models.

Edit: With regards specifically to HFT, I forgot about Chris Stucchio's HFT blog -- really good explanations from a former HFTrader's perspective. Here are the two posts to start from:




answered 18 Apr '14, 16:50

Paul's gravatar image

accept rate: 0%

edited 22 Apr '14, 12:57

Your answer
toggle preview

Follow this question

By Email:

Once you sign in you will be able to subscribe for any updates here



Answers and Comments

Markdown Basics

  • *italic* or _italic_
  • **bold** or __bold__
  • link:[text](http://url.com/ "Title")
  • image?![alt text](/path/img.jpg "Title")
  • numbered list: 1. Foo 2. Bar
  • to add a line break simply add two spaces to where you would like the new line to be.
  • basic HTML tags are also supported



Asked: 14 Apr '14, 13:55

Seen: 6,437 times

Last updated: 30 May '15, 16:18

OR-Exchange! Your site for questions, answers, and announcements about operations research.