Protected: Reasons and Logic

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Good Luck!

by notsogoodphotography

I wish, my dear readers a very happy new year. May your cup of joy be full to the brim, and may your doubts melt away in the fire of passion and determination.

May you live long, and conquer hearts. May you speak little and learn a lot.

May your tomorrow be full of happiness and
May you live a life worth living…

Looking Back; Looking Forward

Today is 31st December. An end of a year. A beginning of another. Its a wonder, memories are so related with time. Though we seldom realise it. If time ceases for me, memories as well. And if I lose memory, I dont think time will make much sense.

I am 25. Some say, I have grown up. Some say, I am still young. I dont know, but I just know I dont have much time left. And yes, though I dont really prefer “on-your-face-take-my-advices” kind of post, but if nothing else, this will serve as an old page from my diary kind of thing, which I guess I will look back when I feel like, and give a soft chuckle reading 25yr ol’ guys understanding of world and himself.

I learnt:

• You are no different than that man on the street or that person whom you adore and admire.: Its easy to get intimidated when we see successful people. Its easy to explain and rationalise the status quo and tell yourself why you wont make the cut. BUT DONT DO IT! Shun the easy way. He is no different from you. You are no different from him. He too is riding on the hard ground of failures and the bed of thorns he slept on before he is being revered. But the question is not, if he is fallible. The question is, are you ready to bust your ass, and put yourself in a position where you are the underdog. If yes, then Welcome to the Club!.
  When I first took plunge in algorithmic trading, I didnt know much about it. I just knew I had to do this. I quit my job, I busted my ass. Scoured the net for information. Contacted brokers for algorithmic support and realised nothing was forthcoming. I was too small a fish to fry for them. But I gritted my teeth. And today, circumstances has put me in a very enviable position to mention the least. I have developed something which I am satisfied about. Given that I am a very harsh critic of my own work, the fact that I am satisfied is a good thing. Some call it fate, I call it persistence. I still plough. I still persevere.
• Copper the Crowds: If you are no different in skill sets or intelligence to the millions of people chasing success everyday then, why do most of them fail while some succeed. Persistence, Yes. But only that? I refuse to believe that no one more persistent than me exists. And I believe as well, that such a kind of person exists in the mass teeming crowd of people chasing success everyday. Then what is my ‘edge’?
  My logic is simple. Its not only dogged persistence, but your reality has to change totally. You can no more believe and bear the same biases and emotional baggage you had been carrying all these years, will prove you successful.
  So the change in reality or the complete replacement of which will require a new paradigm. And it is this. I choose to go the totally opposite way the existing norm is. People are exceeding risk averse, then I am gonna bet my farm. People are shooting from the hips, I am gonna roll my money and run. People are extremely afraid of doing something, I am gonna go in and pull the trigger. Traders among my readers will identify it with Theory of Maximum Pain but it is not,only limited to that.
  Let me recount an example. Since birth I was a skinny guy, I didnt have much problem with eating and maintaining weight and stuff like that. But some months of neglect and I guess stress of starting my new business made me put up quite an amount of fat in my body.  It was around October of 2008. People advised me to eat less, sacrifice all the great things in life(butter,cheese ) and basically the usual suspects. I chose to go the other way. I totally cut out carbohydrates from my diet, loaded up on high protein, high fat. Used to eat butter no less than a mad man. Ate 6-8 times a day(later on I realised I managed to follow Anabolic Diet unwittingly). And of course some amounts of gymming. Within two months, I shed the entire thing and then some. Fellow mates in gym were actually stunned for I was never a heavy gymmer, yet I lost weight much faster than them. They rationalised to themselves, I am genetically endowed. And I just smirked at this rationalisation(We have a history of obesity in our family). By Aug of 2009, I built up on 4 pack abs, before I had to give up my regimen due to travelling.I feel good. Definitely. But more than that, I feel satisfied I went against the crowds and achieved my aim at double the speed and half the struggle.
• Dont have so much respect for others, that you dont have any for yourself: Find yourself, respect yourself, love yourself. Another dimension in the reality leap I talked about in the previous point. Have the conviction to account for your decisions, believe in them and if necessary stand responsible for them. Excuses are for losers. Courage is of winners.
• Pain is good, Monsieur: Pain, Failure, Setbacks. Something which we all consciously or unconsciously avoid. But if you dont embrace pain, you will never realise what you are made of. You will never come face to face with the rock hard steel inside you. And trust me we all have it inside us. I didnt know it, that it existed inside me. When I quit my job. I was not afraid of anything else, but I was afraid of quitting. I was afraid I will quit too soon. Because I had my regrets in my childhood where I feared social pain too much. I feared losing.I feared pain. And I was afraid that my past will catch up with me.When I quit my job and took the plunge,it was less of a battle I was fighting with others and more with my own doubts. And ladies and gentleman, a man can live with a wound, a gash of sword but not with the nagging pinches of doubt. It kills us.So I kept it simple. I just told to myself, I am not gonna quit too soon. And trust me there were days, when I went to bed, consoling myself, “tomorrow will be the last day I have to fight, everything is  gonna be allright”. I am glad that I went through it.Today, I can claim, I have tasted blood. And Lord, am I hungry.

Having completed this, I feel a bit embarrassed, for I dont feel very comfortable, making my most inner thoughts public (sometimes I wonder if blogging was invented for girls ) but I am glad, I took this step. And no matter what, tomorrow again, I am gonna have times, when I will come face to face with my fears and doubts. I will come back and read it again.

And I am sure, I will go back, and once again win over them.

Both Sides of the Coin

It is quite easy to procrastinate.
Even easier to do it, and not feel guilty about it.

But there are times, when I had been very busy with commitments on my business side. Many years ago, I heard somebody say, doing what you like, and making money out of what you like are the same, yet different. They show you different things, make use of your different talents, yet serve the same purpose. To make you happy.

Quite a similar story with me. In the last three months, I was involved in hectic parleys, negotiations and meetings,discussions. In the process, I met with failures, disappointments, setbacks, occassional successes, as well as surprises. One friend of mine, once said, like all good things, entrepreneurship is fraught with risks. And the journey becomes smooth, when you have a partner.
I didnt.
Though I doggedly I put up a fight, yet I found myself often thinking about it.
For those who are out of the loop, and had not been following my twitter feed, I am trying to build an algorithmic prop trading business out of Mumbai. So quite naturally right from writing promotional material to building relationship contacts, I was sort of on the wire 24X7.
Did I sleep well? Oh yes, I do sleep well most of the times.
But did I stay busy. I had 4-5 full time jobs all the time.

So in the process, something which I started in opening weeks of October got delayed. Namely, the quant series I started.
Some other things as well: Namely my much touted aim of closing 100% on long side by the end of this calender year. (that would make it 100% in 10 months)

Personally I was not satisfied as well, with the quality of work put across, in those two posts, so in a way, its better to stop doing a shoddy work.
But now, my readers can hope of a much better frequency, content, not to mention the various requests that have been put forward.

Good Luck.
Soham

Moving Forward

Apologies to my readers for keeping them waiting like this. As of now, I am still out of station, with very limited connectivity and no books by my side to cross check whenever I am doubtful. But in that case, you and I will be betting, that my memory is better than what I think it is.

So moving forward, from the basic definition of a stochastic process, we try to garner some understanding of financial time series.

Now in its essence, if we go on the opposite side of the spectrum, and consider financial time series as a truly random signal, then in essence we have a stochastic process.

Now, let me consider as the daily return series of a financial price asset. Once you have that, consider a change in the return as being governed by this equation

The rationale of this equation, I intend to clear up soon. But let me add a few words about it, is the time factor into the equation. And here is a standard stochastic process called Wiener Process.  This entire equation is called Brownian Motion(with a drift).

Now let me explain what is the rationale of each term. The time dependent term, is what incorporates a trend. A trend is the tendency of a stochastic process to deviate away from the mean. The factor is to account for the appreciation in value with time. The second fact is a scaler. A Scaler of the Wiener Process, or more precisely, a factor which determines the level to which the entire process will be random. So if you make   you will get a purely deterministic process. You make you will get a purely random process.

Now, if we slightly modify the above equation, to reflect the following view:

,

then what we have is a Geometrical Brownian Motion, i.e the next quantum of increment (or decrement) is going to depend on the current value of the random process.

This is an interesting thing to move forward with, and we will see quite a few developments from here extending to option theory, modelling etc.

Till then,

Soham