Man or Machine?
Systematic or discretionary trading? What’s better?
As quants we’re inclined to favor a systematic approach. At the same time we realize that systematic and discretionary trading processes are essentially the same, except for that the former encapsulates the decision-making dynamics in a rules-based framework while the latter doesn’t.
Coded trading systems enable us to methodically repeat a tried and trusted method. That’s a great thing. We let the machine place our bets in the markets and remove ourselves from the day-to-day trading process. If our betting system has edge, we should be rewarded with gains.
Humans on the other hand can be highly inventive and see things which a machine cannot – or at least not easily. But how can you make sure that what you see is real and not just a noisy Fata Morgana of the markets? Well, there’s never a guarantee, but when you’re able to blend statistical observations with long-term trading experience, you can increase the odds of discovering something valuable.
Twoquants is both. Model-driven, but human. That’s our recipe for playing the hardest game in the world.
“No man is better than a machine, and no machine is better than a man with a machine.” (Paul Tudor Jones)
RECENT POSTS
2Q Portfolio Update
It’s been a while since we published the last update on our 2Q Portfolio. While we update the live performance numbers each week on our website here, we don’t usually release details on the 2Q Portfolio’s positioning or its return drivers. But, with the third quarter now behind us, we reckon it’s about time to provide you with some more context and explanations – especially since many [...]
MEDIA
Real Vision: Jerry Parker – Follow the Rules
Jerry Parker, chairman and CEO of Chesapeake Capital, joins Moritz Seibert, CEO/CIO of Munich Re Investment Partners and one of the two quants at twoquants.com, for a deep dive discussion on systematic trading strategies. Parker has had an exceptional career as a systematic trend following trader, and over the last 32 years, Chesapeake has compounded over 10% annually with only [...]
TRADE IDEAS & TOOLS
Position Sizing: A Systematic Tool to Add to Your Trading Toolkit
When most people think about systematic trading, they likely picture a price chart with a plethora of moving averages, oscillators, and trend lines all with the goal of nailing the perfect entry right before a market takes off for the moon. While a good deal of time in systematic strategy development is devoted to entry and exit methodology, the greatest [...]
The 2Q Newsletter
Our 2Q Newsletter covers a diverse range of topics. When we write about trading, we aim to synthesize quant-driven investment ideas into actionable trades. We zero in on price trends, momentum, spreads, correlation, and volatility. We look at futures, equities, ETPs, options, and digital assets – and anything else that crosses our quantitative trading minds. This, we hope, makes the 2Q Newsletter original and unique.
Our Core Values
We want to be guided by what matters: data, numbers, facts
We search for anomalies in the data and, where possible, seek to enter into trades to exploit them
We always want to improve our trading, do something better, find something new
We are agnostic to what the markets seem to be or what people say they are. Biases can kill you when trading in the markets
We read a lot, and across many subjects. This may not be a competitive advantage, but not doing it simply isn’t an option
We study market history and investors’ traumas to become better traders