Building a Trading System Is Derivative

Written by Michael Bigger. Follow me on Twitter.

 

Corbett Barr explains in this blog post that “Everything is Derivative.” Barr points out that “Innovation drives business, and innovation is an incremental process. You take something that exists and push it a little further.”

 

Building a trading system is no different. In our business, people get stuck because they think about D. E. Shaw when they hear the word "algorithm." You don’t need to build a D.E. Shaw system to make money. Build your own system starting with your current knowledgebase, following your own path, and using your own recipes. Okay?

 

Want to learn more about trading recipes? Check out my Trading Recipes post.

Comments

[John Hall]

Great "derivative" post. Point made. I used to struggle with this, that you have to have some original idea and that how can I compete with D.E. Shaw and the like. You would think these companies would have picked out all the inefficiencies in the market and have the economies of scale so how can anyone else compete. Obviously at the nanosecond level the retail investor can't. Maybe the year, month or day trading? At what timescale to you feel the retail investor with slower access and higher transaction costs be able to compete in algo trading game?

[Michael Bigger]

John,

My strategy is not high frequency trading but more medium frequency trading. There are more than one way to skin the cat. Commissions are cheap and APIs toolkit are pretty amazing/cheap.