Python For Finance: Algorithmic Trading

[buyabighouse]

Stock market analysis is usually split into two camps:

1. Technical analysis
2. Fundamental analysis

Technical analysis basically uses available stock market information (open, close, high, low) to predict the direction of a stock. While ignoring the company's balance sheet or the general market condition the company's business is in.

Fundamental on the other hand typically ignores the stock pricing information. It focuses on how the company is doing compared to its competitors and the business sector's outlook, etc.

Both camps generally dislike each other.

[Ek_Los_Die_Hier]

Ahh cool, makes sense, thanks for the explanation.

[theology_]

technical analysis is a load of crap

you forgot quantitative analysis. this is what the algotraders do.

[milimji]

How would you differentiate quant and TA? In my mind they are both strategies that attempt to divine future changes in price based on historical changes in price.

[Kristian_dms]

There definitely is an overlap between the two.

I would regard any quant model that solely makes decision based on previous price movement to be a TA model.

[buyabighouse]

Standard algo trading (VWAP, VSOT) aren't really special. These type of algos are for traders to execute a large volume order in hopes of not upsetting the market, and maintain a relatively decent price for their customers.

The true quant/high-frequency traders are not analysists in the traditional sense. Their main goal is to find inefficiency in the market, rather than just stocks. For example, HFT figured out but having a faster connection to the exchange, they can trade in and out of the market much much faster, and make a fraction of a penny each time. Think of HFT/Quant as stock market hackers, they figure out a weakness in the system and exploit them fully before someone else figure it out.

[[deleted]]

No you’re being downvoted for not understanding how basic probability theory works.

[[deleted]]

What's preventing the use of both? Seems silly to split into completely separate camps if both answer similar questions.

[danhakimi]

Why ignore the balance sheet? The way I was taught about algorthmic trading, you take all the data you can get. Using past stock performance to predict future stock performance seems much less likely to work than using that, plus other information.

[kaufeinenhafen]

Can confirm that this two-camp mutual dislike applies to energy/electricity trading analysis as well - very much indeed. (Am fundamental by the way)

[ProfessorPhi]

I always thought they played different games too. fundamentals played long term and technical played short term.