Anyone here make real trading algorithms that make consistent profits?

[systemtrader]

I apologize if I sound igornant but my question is: how many people here who have a financial engineering degree makes real trading algorithms that makes consisent profits? The reason I ask this question is because obviously anyone who obtained a financial engineering degree is very smart, but since there are so many people who are able to get such a degree how many are actually sucessful at creating profitable trading algorithms. I am not yet a student in a financial engineering program (I hope to be) and so I might not have the best idea of what people with a financial engineering degree does, but I am curious how practical is the knowledge they obained from such rigorous studying/learning. There are people who program much more rudimentary trading algorithms using technical analysis and such, I was wondering if the ability obtained from a financial engineering program would help such people develop better trading systems.

 

[Keith Tan]

i read your post as "any people who have a fe degree can create a crystal ball that predicts the market accurately most of the time."

i'm not sure whether u know what a fe degree is, but it essentially helps people to price derivatives in a risk-neutral world. any price that is out of a risk-neutral price by X amount may be considered arbitrage. sure, maybe from an fe degree you get to create your own crystal ball. but hey, like many traders on the floor, you don't need an fe degree to create your own crystal ball at all.

with regards to better trading systems, even a simple strategy can bring in consistent profits than a complex one created by a phd/ms degree holder, when employed at the right time. true story by experienced traders.

 

[daleholborow]

In my experience, almost no one who works in the finance industry goes home from work and attempts to use their professional knowledge (i.e. what I think you mean when you talk about the skills one might learn in an MFE) to make trading/investing decisions of their own, for their own portfolios etc. It was one of the first things I noticed, and issues I was most disappointed by, when I first entered the world of finance and starting discussing this exact topic with my coworkers.

 

[Andy Nguyen]

The main reason is compliance and potential for legality if you use knowledge learned at work for personal gain i.e inside trading.
You have to clear with your firm's compliance people if you're personal trading of what stocks you long/short, etc.
Who wants to do that as an employee? May as well just trade from home for yourself.

 

[systemtrader]

i read your post as "any people who have a fe degree can create a crystal ball that predicts the market accurately most of the time."

i'm not sure whether u know what a fe degree is, but it essentially helps people to price derivatives in a risk-neutral world. any price that is out of a risk-neutral price by X amount may be considered arbitrage. sure, maybe from an fe degree you get to create your own crystal ball. but hey, like many traders on the floor, you don't need an fe degree to create your own crystal ball at all.

with regards to better trading systems, even a simple strategy can bring in consistent profits than a complex one created by a phd/ms degree holder, when employed at the right time. true story by experienced traders.

Are you implying that you need a crystal ball to create a trading algorithm that makes consisent profits? By consisent profits I meant a trading system that will generate more profits than losses consisently which will make it a profitable system.

Like I said, I might not have the best idea of what someone with a FE degree does, but I was curious since many people with PhDs jump over to finance and I was assuming their motivation was to make money not to spend all day pricing derivatives.

 

[systemtrader]

In my experience, almost no one who works in the finance industry goes home from work and attempts to use their professional knowledge (i.e. what I think you mean when you talk about the skills one might learn in an MFE) to make trading/investing decisions of their own, for their own portfolios etc. It was one of the first things I noticed, and issues I was most disappointed by, when I first entered the world of finance and starting discussing this exact topic with my coworkers.

Well, kind of, but also I meant as in someone who obtains a FE degree may start their own trading/investing business (not necessarily a hedge fund) after obtaining some experience or invest for their own account after quitting employment, etc. The reason I asked this question was because there are people with far less programming/mathematics ability who are able to create profitable trading algorithms.

 

[PTN]

1) There is technical analysis (TA) which a non programmers/ non maths background can do automatic trading via logic program, a drag and drop stuff. This may generate a decent monthly income.

2) However algorithm trading requires programming and advanced statistics knowledge, a higher skill job being hunted by pro shop/IB to generate short term strategies. To answer your question why not many FE graduate involving in algo strategies is because this field does not requires FE background. There are many people still do not know how to differentiate algo trading and automated TA.

Some claimed as long as the system generate consistent income it does't matter what strategies to use. To answer this question, you need to identify your goal in life whether you are belonging to group 1 or 2 mentioned above.

3) The most sexiest skill being hunted is in HFT. I am in the process to finalise the algo and conduct live experiment. Hope by next summer i shall share with you guys here.

 

[daleholborow]

The main reason is compliance and potential for legality if you use knowledge learned at work for personal gain i.e inside trading.
You have to clear with your firm's compliance people if you're personal trading of what stocks you long/short, etc.
Who wants to do that as an employee? May as well just trade from home for yourself.

With respect Andy, I don't think that I necessarily agree with you on this point. There were several (if not "lots") of guys in finance who would still buy/sell stocks, going through the relevant clearance process with internal compliance regulations etc, but i saw little if any evidence of them purchasing said stocks based on anything other than gut instinct/emotion, ala the "ma and pa" investors we're told we're supposed to be more savvy than once we've achieved our various industry-approved qualifications. It was this very point that disappointed me. I'd entered and completed a Masters of Science, hoping for tools to (ultimately) use for my own investing techniques. When I saw that not one person i met in industry was attempting to do so of their own accord, i found that revelation particularly frustrating.

That said, I haven't stopped planning my own world domination

 

[Jay YK Kim]

My question is... even if anyone is making some good money with his/her own algorithms right now, would he/she be willing to reveal the fact to the others? I don't think so... So my belief is that it would be really hard to find the case.

Moreover I don't believe that FE degree is necessarily needed for anyone to make some profitable trading algorithms, although the materials you gain from FE program will surely be helpful. I guess it's really about creativity, keen observations on markets, and practical ability to apply his/her trading strategies into programming codes.