Comment by short_sells_poo | Hacker News Reader

Comment by short_sells_poo | Hacker News Reader

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short_sells_poo

Find a developer job at a trading firm and gradually move from being a developer to being quant developer and finally to a researcher position. Specifically, aim for systematic trading firms as the sort of work you'll be doing is not that far from what the actual researchers are doing. In discretionary trading businesses, chances are you'll be stuck with some boring back office stuff that is far removed from the actual money making. Furthermore, it's at systematic trading firms that a CS background could add the most value to begin with.

Ninja edit: the business is very much based on personal connections and trust. Unless you have a stellar CV, it's your personal network that will get you to places. People who have worked together and have come to trust each other will tend to run into each other. E.g. you work for a PM who then moves on to another place, chances are they'll ask you to join them.

Out of all the industries, trading is the one where you rely most on others not to sink your career through ineptitude or malice. Hence the extreme emphasis on trust. If you are a PM, it doesn't matter if it's one of your traders and not you directly who fucks up, ultimately you are solely responsible for the PNL. Hence PM's are extremely picky who they let in their circle, but then if you are in good graces, the world is your oyster.

If you are the researcher/trader, you want the PM to be good and support you, because they are the primary multiplier of your performance. The PM's job is to devise the overall strategy and get money for your team. The more money the PM can secure, the more you can play with.

This results in tight knit teams who tend to stick together through jobs. In case someone in your inner circle is starting a new venture, they'll by far prefer to fill in the positions among the most trusted connections before even thinking of looking outside.

Thanks for the in depth answer, i truly do appreciate it.

What should I begin studying to put myself in that position in finance?

Contrary to how it is often painted, finance rarely goes above undergraduate level stats. If you have a reasonable handle on that, you are already well set on becoming a quantitative researcher. If not, doing a couple of courses will give you a good grasp on most of what you are likely to encounter. If you like math, that's 50% of the battle won, because learning about the various methodologies will be an exciting discovery and not a slog.

The well kept secret of the industry is that complicated stuff rarely works, and if it does, people often don't exactly know why. Put differently, a good algorithm has obvious and intuitive failure cases. That is, it is (relatively) easy to reason under which market conditions will it work well and when it will not. Extremely complex blackboxes are tricky because it's not obvious when and why they stop working. They are also very easy to overfit. Every single additional parameter you add to a model is an additional degree that you are likely to overfit just because of survivorship bias.

It is for this reason that the absolute vast majority of systematic trading relies more on intimate market knowledge than very secret sauce and super complex ML strategies. Sure, many funds run some token ML crap (which is often quite vanilla, like gaussian processes or decision trees) with very minor impact on PNL, but this is purely for marketing reasons.

There is a small handful of companies who have the manpower, expertise and infrastructure to run more complicated models, but even there, the fundamental ideas tend to be relatively simple, and the complexity arises from the amount of data and market idiosyncrasies.

> It is for this reason that the absolute vast majority of systematic trading relies more on intimate market knowledge

Aside from reading books about market segments and biographies of companies, what are some things you can do to gain "intimate market knowledge"?

Unfortunately the best (only?) true way is by doing. I suppose prospecting is the best analogy I found. You study geology and gain some theoretical foundations so you understand the relationships and can analyze the results, but you have to go out in the terrain and get your hands dirty so to speak to get true intuition and understanding.

Also, doing it on your own is tricky. You have to constantly talk and mingle with others or you quickly lose insight into current developments. Having a group of people to bounce ideas off of is incredibly important. On your own, every single small topic is a potential rabbit hole that you can spend endless time researching. In a crowd, someone has already explored that rabbit hole most likely and can give you practical pointers. At risk of sounding like a marketing prospectus, there's real synergy in being part of a team. I dare say the age of lone wolf traders is gone. They've been arbitraged away. Successful people have teams behind them.

So I'd say the best way to gain market knowledge is to join a systematic trading shop (in almost any technical capacity) and once inside, you just talk with the others. People in systematic firms tend to have a solid academic approach and are usually more than happy to teach and enlighten anyone interested.

That just brings us back to the beginning which is how can one break into a systematic trading shop?

What other name do they go by? Like what should I google if im looking for one in my city?

Is there no way for me to get a leg up on gaining that "intimate market knowledge" no insider books or reading/newsletters?

A recruiter can help you break into the industry. You can contact them directly or apply to jobs that they represent and they will contact you if they're interested. I'm not sure what the market is like these days for junior people, my guess is you need at least a few years of experience as a working programmer before a recruiter would be interested.

There are only a few big systematic funds. I think it's just Two Sigma, Jane Street, Citadel, Point 72/Cubist and AQR. Maybe a few others. You can apply to those yourself, but they're picky. Then you can look on LinkedIn for hedge funds looking for programmers, although it may not be obvious which are discretionary versus systematic.

Hedge funds are only in a few cities. About half are in NYC and Connecticut, then some are in Chicago, Boston, Houston and the Bay area. And maybe a few small ones elsewhere on the West coast, I'm not familiar with that area.

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