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charcoalstick

How Do Bank Traders Trade? Using Chart?

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It all depends on the bank and their strategy. Many banks clear for hedge funds, which trade however they want. In general, most use both fundemental and technical analysis. The exact mixture, I have no idea.

 

Many banks hire quants to use mathematical modeling (which is based on price). As for training, most of those traders have a masters or PhD already.

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Maybe alleyb will chime with his thoughts since he was one as well.

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I think it really depends on what style of trading the bank is doing. Different parts of the bank are going to have different strategies. Some don't require charts, others do.

 

Out of curiosity, why do you ask?

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It really depends on the role of the trader. Banks will have a mixture of traders... sales traders, program traders, arbs, prop, etc... Been to various banks here in the Tokyo area and I would say 80% of all "traders" have no need for charts. Fixed income traders look at numbers most of the time, program traders just press buttons, sales traders just need price quotes... Although you will usually see 1 or 2 charts on their screens most of them have no clue how to read one. A JP Morgan trader once told he was not so chart proficient. He had the most ugliest trendlines in place.... made no sense at all.

 

I think prop traders are the ones that rely on charts the most... though I have seen some of the best traders trade without charts. A big time trader here told me that he doesnt need charts as he can visualize it all in his head. He simply relies on %.

 

So, in conclusion charts is just a tool one can use. there are so many other ways to trade the markets.

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I think it really depends on what style of trading the bank is doing. Different parts of the bank are going to have different strategies. Some don't require charts, others do.

 

Out of curiosity, why do you ask?

 

because i m thinking that they should be the best traders..so might be good to learn how the best trade...

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because i m thinking that they should be the best traders..so might be good to learn how the best trade...

 

They also have huge sums of capital. So, there trading decisions may be based around this. To learn how they trade may require a big account, or wide stops.

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They also have huge sums of capital. So, there trading decisions may be based around this. To learn how they trade may require a big account, or wide stops.

 

yeah..

but if bank traders mostly don't use chart but prop traders use charts..and prop traders mostly lose money...is charts a good tool?

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yeah..

but if bank traders mostly don't use chart but prop traders use charts..and prop traders mostly lose money...is charts a good tool?

 

There's a whole bunch of if's, then's, what if's in that little post right there.

 

1) You have no idea what "bank" traders use for trading

 

2) You have no idea that "prop traders mostly lose money"

 

Therefore, there is simply no connection in what you are attempting to ask/state and equate that with the use of charting in trading.

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yeah..

but if bank traders mostly don't use chart but prop traders use charts..and prop traders mostly lose money...is charts a good tool?

 

You also have to remember the mindset of a small time prop trader and a bank trader with a big capital back stop. The little prop guy, may constantly trade with emotions, while the bank traders may have the confidence to stick to the plan. So, tools are nothing without the confidence, to stick your trading plan.

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Almost all of use here use technical analysis, which is based on price action (which is on charts). If you went to a "investment" forum, you'd may hear that charts are a waste of time and fundemental analysis is the way to go.

 

Neither of your statements regarding banks and prop traders have much factual basis. If you catch the news, banks haven't been doing very well, and many "prop" traders I know are doing extremely well. There's little correlation in either direction. Also, to reiterate what's been said, you don't have millions to throw around, so you can't do many of the things big banks do. Learn some market basics first, and you'll get an idea what a retail trader can do.

 

That being said, I would recommend you do some reading first. It sounds like your understanding of the markets is elementry, so any basic finance/investment/trading book will do. As long as you stay away from the efficient market crowd, you'll be fine :).

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because i m thinking that they should be the best traders..so might be good to learn how the best trade...

 

Each trader is different, you need to find what makes you a good trader and not worry about how anyone else trades. Some traders are great with fundamentals, others are great staring at the order book, and others do well with charts. Frankly I wouldn't worry about the banks, I would worry about supply and demand as a whole and how it pertains to your time frame.

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I am starting to study more in the line of Quantitative Analysis. I'm trying classes to brush up on the math skills part of it. So far my studies are showing banks and institutions in many cases working like this in trading and portfolio management

. I think it's very interesting stuff but it is for sure a whole new topic away from a lot of the traditional charting and pattern trading we do here.

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I am starting to study more in the line of Quantitative Analysis. I'm trying classes to brush up on the math skills part of it. So far my studies are showing banks and institutions in many cases working like this in trading and portfolio management

. I think it's very interesting stuff but it is for sure a whole new topic away from a lot of the traditional charting and pattern trading we do here.

 

May I know more specifically which area of quantitative analysis are you referring to?

Thanks

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Im just getting my feet wet in this, but what I like is the computers use of formulating

things like styles of arbitrage optimixation , and system trading.

Lots of data mining, then building strategies and taking advantage of the computer to optimize these strategies in all types of ways.

yield curve models, and blah blah, .

For me I enjoy another way to approach portfolio managment and risk managment. Both which are things I would like to maybe one day specialize .Who Knows.

Anyway I think a ot of banks trading are based on sytems build on quant methods. I can't say for sure but I am starting to strongly get that idea as I learn more.

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was wondering how bank traders trade...heard they don't use charts..?

anone know how do they trade..and how was their training like?

 

You might like to ask yourself why banks trade to better understand how they trade. As others have eluded to different 'divisions' will have different motives. Each will require different strategies and tactics. Not all motives involve making money btw.

 

EDIT: I forgot my non affiliated plug for http://www.amazon.com/Trading-Exchanges-Market-Microstructure-Practitioners/dp/0195144708 A great trading book and possibly the best on how and why different participants trade. If I could write a review to do it justice I would. A favourite.

Edited by BlowFish

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Lots of data mining, then building strategies and taking advantage of the computer to optimize these strategies in all types of ways.

yield curve models, and blah blah, .

 

Good stuff, I'm undergoing the same process of converting over to a "baby quant".

Modern data mining ideas have virtually not sifted down to the retail crowd at all. I don't really see this changing either. I mean its easy to sell the retail crowd neural nets because everyone has a brain and then assumes they have the background to understand a neural net conceptually. Try to sell the retail crowd a support vector machine product and its obvious there is alot of background information needed just from the name of the technique so no one would buy it.

To me as far as banks go the question is what techniques can we take from them that will be good at our level as opposed to how you can trade like a bank. Data mining and time series analysis stick out like a sore thumb IMO.

I also somewhat believe that there is a missing concept as far as risk goes. To view the risk of a 100% drawdown on a 5k account as the same as a 100% drawdown on a 10 Billion dollar hedge fund seems pretty absurd. Some place in there there is risk of not putting on enough risk in the 5k account. To view things the same as the way people handle the risk of having to raise a billion dollars doesn't strike me as optimal.

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Im just getting my feet wet in this, but what I like is the computers use of formulating

things like styles of arbitrage optimixation , and system trading.

If I may ask, what programs are you using to do your research? I'm considering buying Mathematica to do some larger data analysis, and don't know if there's anything better on the market currently. What data feed are you using?

 

I heard Excel can do wonders, but I come from a programming background, so often I find it easier to write a program than sludge through menus.

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Ah yeah, MATLAB; I've used that before. I was looking into something that looks similar.. Derivates Expert for Mathematica. I know I can get a discount on Mathematica, which is why I was attracted to that (no idea about MATLAB).

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From what I've found I think its best to go with R starting out. The biggest advantage is there are tons of text books on how to do specific techniques with R so you can both learn R and the technique/theory at the same time.

Matlab is much prettier but you would more or less have to learn from purely theoretical textbooks(or textbooks with code in R) and then translate it over to matlab. For me at least the hands on experience with R is much better without the structure of a class room as I go.

R can also be called from matlab or excel too so even if you needed better GUIs someday your code/knowledge isn't going to go to waste. Programming straight out in VBA in Excel is surely an option too but I would think you would run into bottlenecks sooner than later. The program you pick probly doesn't matter much though, the real issue is how feasible and driven you have to be to learn graduate level machine learning and stats on your own.

Also MATLAB with the toolboxes you would want will run several thousand dollars, R is totally free.

Edited by darthtrader2.0

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Thanks, I am checking out R now. Funny thing, I started showing the link to my buddy and turns out he coded some modules for it .(small world) So he is willing to help anyone who has a questions with it.

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