The Trade Busters 137 - The Scientific Method of Strategy Development w/ Quantitativo
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Sep 26, 2024 Carlos, a Brazilian quantitative trader and the mind behind the Quant Trading Rules blog, shares his journey from engineer to trader. He discusses innovative mean reversion strategies based on first principles and the importance of systematic strategy development through scientific methods. The conversation highlights the role of blogging in fostering community and knowledge-sharing among traders. Carlos also addresses the integration of machine learning in trading while balancing complexity, emphasizing the iterative nature of refining strategies.
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Carlos's Background
- Carlos, based in Sao Paulo, Brazil, transitioned from a background in aerospace engineering and entrepreneurship to focus on quant trading.
- His journey included founding and selling tech companies, pursuing a master's in computer science with a focus on machine learning for trading, and finally starting a quant trading blog.
Sharing Investment Approaches
- There's a tradition of successful investors publicly sharing their investment approaches through writing and speaking.
- Carlos observes this pattern in figures like Warren Buffett and Charlie Munger, who have documented their ideas and held conferences for decades.
Mean Reversion Strategy Breakdown
- Carlos's article "A Mean Reversion Strategy from First Principles Thinking" breaks down a mean reversion strategy into its core components.
- It then builds a new mean reversion indicator, tests it, derives a strategy, and backtests it, demonstrating a scientific approach.