Wednesday
Jun092010
The Skillful Robot
Wednesday, June 9, 2010 at 9:01AMWritten by Michael Bigger. Follow me on Twitter.
I get a kick of following Twitter user and algorithm expert @milktrader. I enjoy reading his blog. Recently, Milk Trader wrote a great blog post entitled robot (SPX) = $. It got me thinking about what skills one must have to become a great trading algorithm designer. In the second paragraph, he says “Skill acquisition involves getting re-acquainted with higher math and getting some solid programming proficiency under your belt.”
From my experience, math and programming skills are not enough to turn you into an algorithmic trader. Sure, they are important, but if you lack those skills you can always purchase them. What you need are algorithmic trading design skills: you must be good at creating algorithms from trading methods. I wrote a blog post about this topic entitled Financial Artistry, not Financial Engineering.
Be creative, experiment, observe how nature works and how humans behave, and apply your findings to the market. In our search for a great algorithm, we should heed Frank Oppenheimer’s philosophy: “Oppenheimer stressed the importance of play, courage, and guesswork Science.” Something Incredibly Wonderful Happens: Frank Oppenheimer and the World He Made Up (Amazon affiliate link).
There is no need for the creative algo trader to go back to making cheese. Iterate until you succeed. Will you?
Reader Comments (6)
I read that book Lynchpin by Seth Godin you recommended. I agree creativity is greatly undervalued as important to success even in highly technical fields. You should read Outliers by malcolm Galdwell. It has similar findings and quick read.
John, thanks for the tip. I will get on it!
It's probably easier for a trader to become a programmer than the other way around. The reason expending the effort to learn it is not so you can have something to talk about at cocktail parties (I don't think I've ever seen anyone mesmerized by your local nerd).It's even more than being able to control the process. The effort to learn programming skills is as much an exercise in mental discipline as anything else. A trade idea that needs to be put down into code requires a very good grasp of the theory behind the game technique. I think of it this way. Professional football players are not professional weight lifters, but they lift weights and work out to keep their physical presence strong and their minds focused. As a trader, go to your local mental gym and learn a programming language. It won't make you money, but it will help you trade. Just like the football player who lifts the most weights is not guaranteed to win the game, but that doesn't keep them on the sofa eating potato chips.
I need to think about your perspective a little more. Right now, I feel that the programming skills I need for the stuff I do, would require too big of an investment if I had to learn them. It might be that we just go about it in different ways and they are no wrong ways to go about it. It makes me think. Good stuff!
Weighing the cost of time invested in programming versus the reward is a valid point. Perhaps, though, there is something useful short of becoming a programming expert. In programming, there is a concept known as pseudo-code. This is a written out plan of what you want your program to do. It will not run on any computer anywhere because it's not 'real' code. The computer does not understand it. But if you give your program pseudo-code to a programmer, she should be able to easily convert it to the specific rules of a specific programming language and get the thing to work - that is, if the pseudo-code is logical and has any chance of working. Interestingly, pseudo-code is another name for algorithm.
Very True. Working on the pseudo-code is creating the algorithm. I just never think about it that way. Thanks for the input.