Quant Trading - A History

I have been a trader for over twenty years, and from the start of my hedge fund career working with Victor Niederhoffer I have taken a quantitative approach to researching and executing trading strategies. A quant trader is a trader that builds statistical models to test trading strategies rather than relying on intuition and experience. Today we will look at the history of Quantitative Trading from 4000 years ago up until the present day. We will discuss the contributions of people like Ed Thorp, Victor Niederhoffer, Mike Adam, David Harding, Martin Lueck, David Shaw and James Simons.
Patrick's Books:
Statistics For The Trading Floor: amzn.to/3eerLA0
Derivatives For The Trading Floor: amzn.to/3cjsyPF
Corporate Finance: amzn.to/3fn3rvC
Patreon Page: / patrickboyleonfinance
James Simons Video: • The Story of James Sim...
Sell In May Video: • Sell in May And Go Away?
Books Mentioned In Video:
My Life As A Quant - Emanuel Derman amzn.to/3vGW0HT
Education of A Speculator - Victor Niederhoffer amzn.to/3b3Gtdh
A Man for All Markets - Edward Thorp amzn.to/3xOqlq0
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[@PBoyle]

Thanks to our growing list of Patreon Sponsors and Channel Members for supporting the channel. www.patreon.com/PatrickBoyleOnFinance Marc De Mesel, Annie Chen, Nate Stapleton,Timothy Baird,Cab1260, WIlam, Robertas, Hernan Merino, Random Encounter, Nieuwsbrief Ikwil, Bee Positive Consulting, hyunjung Kim, John Cadena, Ian Tracey, A Smith, Callum McLean, Oscar, Simon Pena, Alexander E F, Cyrus Yari, Ed, Pavle Obradovic, Erik Van Ekelenburg, David O'Connor, Zak Patterson, Ki Ryu Chan, Pjotr Bekkering, Drew, Ivaylo Kunev, Alex, Robert W Proudfoot, EatEmAll, Michael Boensel, pooh shmoo, Robert Muller, Andre Michel, Ivan Iliev, Gopaljee Atulya, Milan Tomic, Mark Hooker, Artem Vasenin, P H, Mathews Sebonego, Sebastian, Michal Lacko, Yann M, VicMR, Peter Bočan, Michael Pierce, V Jordan, Steve Kinnear, Gil, HalfwitHam, Mark Brophy, Patrick T, David Urdenata, Juan Valdez, Bruce Roberts, Chad Norman, Bruce Roberts, Shamikh Rana, Friday Guy, Marc De Mesel, Augusto Ramos, Soy Boomer Doomer, Bob Slartabartfast, Robert Feiler, Camil Dbouk, Erik Montesinos, Matthew Loos, Az Indragiri, Aman Bali, Lautaro Parada, Pratap, Deborah Joseph, Robin Sung, Kurt Johnston, Dominik Auerbach, gurmeet Kaushal, John Hall, Dara Mo, Josef Goergen, Wilbert Cheng, Daniel Talero, Cogitecture, Jaroslav Tupý, Trevor Lucey JB Weld, Alex, Sunny, Carlos Figuera, Peter Pomelov, Mitchell Rowton, Pedro Texeira, EV Bike Dude, Luis Quintino, Null065, Rick Thor, MeBerzerk, Henry Nguyen, Sola F, The Collier, Carlos Mejia, J Wadia, Bitcoin OG, Steven MIller, easy boekhouding, Albert, Eugene Jung, Kent_Kinky, Oisin Quinn, Daniel Cervini, Wilson Hammer, luke ward, Jonathon Yong, Iris Ji, Emil Nicolaie Perhinschi, Charles, Leszek Frankowski, Gerard Scott Eli Auto, Excks, Michael Li, Par Hedman, Praveen Mishra, Gerard Scott, joel köykkä, Areeb Ahmed, Luis Torres, Smith Vilcapoma, David Wang, Yazan Qaraqish, Rodolfo Cornetti, Hunter Lofgren, Justas Juškevičius, Daniel Winroth, johnny, Nick Jerrat, Chris Houston, Johan Levin, Morgan Brown, Alastair Currie, Robert Griffin, Andrei, zizi Golo, Fab Vida, Constantin Petrenco, pawel irisik, NotAScam, James Halliday, 22 Dust, Carsten Baukrowitz, Heinrich, Arron T, Severin Felber, Kam Batra, Ben Brown, Brian Dennis, Stephen Mortimer (to The Moon), Ryan B. Hicks, B S, Adam Horenstein, Liam, Logan Vrankovic, Sam coatham, William Heaton, Paul McCourt, Andrzej Jasionowski, Daniel, Aaryan Koura, paul koos, mikhail tyurin, Steven, Christopher Boersma, Nathan Smart, Dave Cooke, Jonathan Young, Ulf Lundblad, Cozy thang and Yoshinao Kumagai

[@StephenMortimer]

You are not dry but ARID !!

[@shaunk.mcgovern2093]

☹️

[@fazethijs6943]

Hey man can you do a video about the quant quake of 2007 and how GS quantitative principle investment fund lost more than 100 billion dollars in a few weeks

[@reggie3819]

Good morning professor. I'm training to be an engineer, but I feel the real education happens here.

[@abdullahkauchali3896]

Excellent Patrick, keep them coming! (I hit the dislike button twice!)

[@trynseed779]

I noticed everyone applauding the knowledge that you bring to every video but are they all missing how hilarious you are. The dry humor is a big part of why I watch your stuff. Don’t ever stop.

[@kurtjohnston6620]

".... and instead became rich. Sometimes things just don't work out for you." - That's gold Jerrry, Gold!

[@CleverSmart123]

100% agree, makes it more entertaining

[@JeremyPickett]

My gourd, pulling up that old video of the guy just about to be debunked by James Randi, and the list quip, "How else will I learn" are priceless. Come for the detailed analysis, stay for the laugh out loud humor. (Moonlights as the CEO for Goldman, omg)

[@mjwchapman]

disliked and unsubscribed ;-)

[@DataLog]

His jokes are awesome and I'm pretty sure that people notice them. It's just not necessary to talk about it in the comment section.

[@tianxia4092]

It is just incredible to me that concepts of Trend Following and Mean Reversion are so ancient.

[@Arsbars1]

Yet still valid

[@gidsmono8044]

Are you talking about trend following?

[@Arsbars1]

@@gidsmono8044 yes

[@gidsmono8044]

@@Arsbars1 thanks. The reason I asked is because someone was recommending I do all my trades on trend following alone.

[@scottydog9997]

Its amazing, I personally have built tools around these two concepts considering and consider my techniques somewhat nuanced, however they really are concepts that have been tried and tested for thousands of years.

[@mr.marketoriginal3808]

You spill your wisdom on us, dear Patrick!

[@patrickboycle1251]

W•H•A•T•S•A•P•P +•1•8•5•7•3•4•2•9•8•7•1• I•n•v•e•s•t•inC•r•y•p••t•o B•T•CA•N•D•E•T•H...!!!!

[@bobbyboljaar7513]

Patrick really showing us he is a man of culture by showing he reads Feynman on the side.

[@stockmics5807]

Been on youtube for over 10 years , this is probably my first comment ever. Gotta thank you for every single video you upload , very informative and the humor inbetween makes me laugh everytime. Keep up the amazing work !

[@cortempestas2982]

"Of course today we have the counterexample of George Soros, who wanted to become a philosopher but instead become rich. Sometimes things don't work out for you" this is the type of failure that I want in my life"

[@farouqAliyu]

I like how he makes jokes with a straight face.

[@ThomasRonnberg]

You, Monsieur, are a well educated individual.

[@ryanlee4361]

he got me there

[@kofiamoako3098]

he made me laugh out so loud everyone thought i was watching a skit. They came to see and were very disappointed

[@bestfriendhank1424]

As much as I want for you to make more videos, I’m glad you don’t destroy your channel with a constant barrage of new ones.

[@damianchang6439]

Tbf I think his day ‘jobs’ teaching at King’s Business school and running a quantitative hedge fund (Palomar) keep him sufficiently busy not to saturate his channel.

[@nickmalone2731]

@@damianchang6439 i don’t think he works at palomar anymore

[@paullangton-rogers2390]

I agree quality over quantity is better. There's so many channels that just constantly churn out new videos but don't teach you much as they're focused on gaining views, subscribers and more advertising revenue. Patrick's videos are pure gold to investors or people just wanting to learn about economics and understand how financial markets and trading works from an economists prospective. He could do well with making an exclusive video series teaching people about macro-economics and the fundamentals of trading using his quanitative approach, I'd certainly pay monthly to watch that as Patrick is a good teacher and you can learn more easily from him than reading books.

[@secret-thailand6161]

I'm having a proper binge since finding Patrick. Great videos!

[@haleyw5677]

This is amazing. I can’t believe all this goes back so far!

[@lancef8291]

Another great video with no fluff approach and full of informative topics. Keep up the great work Patrick.

[@johnhoude1340]

I counted the number of words spoken in 15 minutes on CNBC. The more words spoken the likelier we were at a top and vise versa. I also set up a decibel meter. The louder the show the more likely a top was in place. I also converted candle stick charts into musical notes and had a concert pianist "Play the Dow Jones" . Very effective for finding tops and bottoms. That's what creative thinking s all about.

[@peacebywisdom]

Your videos are in a class of their own 😊. Great content. Perfect delivery. Thank you!

[@timvincent8649]

So true. Creativity is the key to find good trading ideas. I heard about one student who managed to "borrow" a Bloomberg Terminal in a library and started to analyse the movements of all oil-ships that was moving from one place to another. He managed to see a pattern of the movements with the Crude Oil-price and started to trade his own savings with CFD's on Crude Oil. He sat in this library day in and day out as soon as the computer was available. He became a millionaire after a few months and got himself his own Bloomberg Terminal later on. Pure creativity there!

[@bogdanhadarag5223]

Patrick, I love the videos you make! They're informative, critical, witty and very funny sometimes. I with you'll get more subs. I already shared your channel's link with my friends and talked to them about it. Keep it up!

[@macrovigilance]

Loved this historical account of QT Patrick. Very nicely done!

[@benelkinne9808]

great history lesson on quants, I haven't seen a deeper knowledge on yt. keep up the great work , love the jokes, puns, and jabs as well.

[@altoticket]

Love your sense of humor... great wit helps a lot in making such deep research even more memorable, thanks!

[@awk4080]

Your explanation on quant trading and why it appealed to you at the beginning of the video really resonated with me. You have very strong articulation skills; I appreciate the video.

[@cegresearch]

Ser history of trading is needed more ; please more ser

[@polluxcastor8429]

I love this video so much. I have spent a few years trying to focus on this exact subject.

[@BillyLapTop]

Thank you for this short wonderful history and overview and examples of Quant Trading. It gives a look into the depths of the intellects of those who came along and created it. Actualized imagination is a wonderful thing. If you got it, flaunt it!

[@AlexVoxel]

The history of quant is very fascinating to me. Thank you for making this!

[@angusmcfarlane1225]

I hit all the like buttons, and would hit many more if I could! I always learn massive amounts of fascinating new info from every video. Thanks a million, Mr Boyle!

[@vijetarvindpatil7579]

Sir, Good Content... always excited to see your videos!

[@kpcrisp3789]

That was top class. Could have listened to hours of those fascinating tidbits of financial history. The Japanese Rice "Futures" blew my mind.

[@arthurtreibs4174]

Thanks Pat. Very interesting and extremely well researched material.

[@toviyaslager90]

Fantastic! Always fun to watch your videos.

[@TheWhoever94]

Exceptional content! 👏 Thanks Patrick

[@vincentbiondo7019]

That ending, I liked and am buying your book tomorrow

[@mistersandy]

You're the only Channel I've found in finance that I feel is worth subbing to. I have a total of 4 subscriptions and two are family.

[@jennerb7059]

Thank you Patrick Boyle! I learn a lot from your videos.

[@blakebrothers]

Excellent video and brief history, many thanks!

[@dvdm4709]

Very good stuff. As always, Thank you for the video

[@jonsmith82]

Patrick who would dislike your content !!! you are a financial encyclopedia on feet :) if only i found you when i was in my 20's i would definitely changed my career, but anyway im trying to do so now in my 30's all respect to you my friend.

[@madamkirk]

Simply some of the best videos out there.

[@fl3sh475]

I am not sure what I love more, information that you are giving us or your senses of humour ;)

[@NERDdoMERCADO]

great video Mr.Boyle, IT WAS A GREAT JOURNEY THROUGHOUT HISTORY...

[@Matthew-ez4ze]

Superb episode. Classical, empirical and subjective analysis must all be used together.

[@leehant]

So much value in such a short video

[@prakashmallick000]

I just love your videos, especially the subtlety of the humour

[@jamesy3851]

Another Patrick Boyle video. I check your channel way too frequently for new videos :)

[@nonyafletcher601]

Loved it! Very informative and entertaining

[@DaftFader]

You wright some of the most informative comedy sketches I think I've ever seen. I don't know how you keep a straight face through some of them punch lines, but the deadpan delivery is masterful. Sound info too! :)

[@DaftFader]

Seem's I'm a year late to the party with the top comment here. (I thought this was a new video of yours as it just got recommended to me). Still funny AF tho mate. :)

[@youngarmani7155]

This is your best video thus far !

[@MarkusLaumann]

I would watch a movie called "Revenge of the Quants" all about their zany antics and attempts to get a peak at that juicy TA.

[@MarkusLaumann]

@Jacob Hargrave I feel like I need to clarify because I didn't think Revenge of the Quants would have google hits. He had a picture of the cast of "Revenge of the Nerds" (1984) representing the early Quants. The movie was a cheesy and full of nerds spying on sorority girls. I tried to make a pun but I am not a smart man.

[@damianchang6439]

@@MarkusLaumann I got it… you had to have known about the film “Revenge of the Nerds” to understand your pun tbf lol

[@stachowi]

My first time watching... i subscribed. Great job!

[@TrashwareArt]

Love your content, I've been going through a lot of (positive) life changes recently and content like yours helps me see the world in a more modest way. Thank you.

[@TrashwareArt]

@@patrickboyle315 you sound just like the guy in the video

[@vanessabirrueta6972]

Thank you for posting this. I’m an undergrad student majoring in CS/mathematics with a significant interest in the finance world, so this is the exact explanation and dive into quant traders I was looking for. Thank you

[@rhs5683]

Same but my major is math. Now I'll look up all the people I dont know xaxa.

[@lukhanyovictor]

I would like to work with you on algorithmic trading. I believe I've cracked the code

[@lukhanyovictor]

​@@rhs5683I would like to work with you on algorithmic trading. I believe I've cracked the code

[@mario7501]

Amazing video! Also the dry humour is awesome!

[@alandb2481]

Another great video. I started out as a commodities trader in my early 20's (20 years ago) and I now know that I was a quant trader. At the time though, I had zero experience of markets or trading and I wasn't aware of how anybody else did it. It just seemed entirely logical to look for correlations in data, so that's how I traded. I was astonished to find out as I later got to know traders in other companies that many didn't even use an excel spreadsheet, they just relied on gut instinct.

[@lukhanyovictor]

I would like to work with you on algorithmic trading

[@kylejf9059]

Oh, so look who finally uploads an actual *new* video. None other than Richard, taking time out from the Crystal Maze. Thanks 👍🏼

[@siddharthb2633]

I simply love this channel.

[@jtlon1]

excellent as always. Thanks

[@hatem0]

amazing how you compile all these information

[@oddballlw]

Great selection of books! “Surely You’re Joking, Mr. Feynman” is my favorite book of all time!

[@cervelo9465]

An amazing wealth of knowledge and information, grateful, sincerely :)

[@davidcmkubai9327]

Thalus began Options or Futures trading. Nice quantitative finance vlog Sir. Homma is a legend for most of us in trading world.

[@kineahora8736]

I am very impressed with this channel...

[@CookbookAdventures]

Wonderful video, thank you.

[@abhigyaanrishee9998]

thank you for making this video

[@stevgreaty7541]

I loved this video. But I loved even more that you got the second desk plant :D

[@visionsoftheend4299]

The price for that plant was Ray Dalio's book, which isn't there anymore. 😭 I've won... but at what cost?

[@fl3sh475]

The quality improvement since Sell In May video is huge. I wish my gains was also so huge ;)

[@whheaton]

I love the dry delivery. Incredible information. I am in computational biology / genomics and it has been interesting seeing a similar evolution of the field as statistically trained people enter the field (my background/culture is primarily Computer Science, but I'm also an MD by the urgings of my father who is a physician). In my field, it is exceptionally useful to have a deep knowledge of both stats/math/cs and biology. I would imagine it is similar in quant finance to have a deep knowledge of certain industries, finance in general, and stats/math/cs. The friends I have in quant finance don't seem to have that. Do you think a hybrid but at the same time deep knowledge in both is really helpful or is the quant aspect so much more useful that it is better to be ultra specialized? Thanks again and I'll pick up the books you mentioned that I haven't read. I read Thorpe's book and it was very interesting and entertaining. I like the honest experience of a clear genius. Maybe a bit self congratulatory but he has plenty of reasons to be arrogant and I don't bemoan him his due.

[@ivaniliev496]

Nice Patrick Boyle - my compliments for that neverending effort - the strive for excellence. Those fragments from the film Wall street fit in just perfectly with the narrative. In that line of thought would you consider to get Charlie Sheen as a guest, I am sure it will be appealing to everyone - the two of you discussing life in general,investments choices, how he prepared and got into character for his part in the movie and so on! And if I may add I think sometimes Patrick you also get in character.

[@zaid88fh]

professor, you are wonderful.

[@michaelgunawan3917]

Hii Patrik, every video that you made is gold. Love from Indonesia..

[@paullangton-rogers2390]

I'm fascinated by quantitative trading, despite having a university degree in business and over 10 years experience in trading and investment I knew absolutely nothing about it until I started watching this channel. Quantitative trading would seem to suit my personality perfectly as I like collecting and analysing data and coming up with new ideas to do an analysis and using data to create new signals and apps. I'm a data/facts geek and also a programmer 😁

[@johneberle5814]

Could you please do a video on Wall Street risk management? I think it would be super interesting! I love your videos please keep it up

[@kikobarros76]

Lunchtime here!! great video!

[@CristianHernandez-er4zn]

I just want to open a new KZbin account and subscribe to your channel again... great work professor.

[@MrMarccj]

Thanks Patrick, another great video. Regarding trading using the movements of the planets, there is some evidence for this. Our wheather is to a large extent governed by the 11 year sun spot cycle which causes the El Nino phenomena to name but one. The 11 year sunspot cycle is governed by the movements of the planets and so, by understanding the planets one has an edge with Ag trading, again, to name but one.

[@Toto-cu1rp]

Great stuff!

[@daniel3897]

Love it. Thanks

[@Reavenk]

9:26 That font size observation is next level!

[@yorkshireway150]

Im big fan of yours. Lots of love❤❤❤

[@CarlWithACamera]

Technical analysis, like any numerological method, at best can be applied to predict an immediate event. Time sweeps away the wash of a butterfly’s wings.

[@SusieAspen]

Very interesting history lesson.

[@robertobenedit]

Tu humor es genial, me encanto el video

[@mindcache5650]

Good history . I was a broker to AHL in their start up days when they worked with Rudolf Wolff . They were pattern recognition in the beginning.

[@NoName-xc6cg]

Interesting

[@albertmaynard1147]

Love your use of the Wizard of Christchurch .... Haven't seen him since the earthquakes down there

[@altfiwithleighlommen310]

Patrick, I would love to talk to you about your quant trading. I LOVE it, but got out bc I felt it was too costly to get a cutting edge execution and alternative data. You really need to start with 30-50M just to have a profitable organization. That being said, I love it with all my heart.

[@kidfisch]

“We also learn the importance of backing up your data” 😂

[@MagnusAnand]

Great video!!!!!

[@krishnaramtohul818]

Patrick we like u also in Brazil.......

[@victorgbs]

Fale por você. Tenho um desgosto enorme por quant trading. É basicamente a ciência de criar um programa e comprar infraestrutura pra roubar dinheiro legalmente.

[@krishnaramtohul818]

Bem vindos mondo realmente....

[@saveenergy8702]

You're a genius, Sir!

[@bbow4972]

I love the dry humor. Great content

[@paullangton-rogers2390]

I've never heard of quanitative trading but it makes a lot of sense and seems a more logical and scientific approach to trading compared to the way most traders operate. I'm going to buy Patricks books and study this method closely. One approach to trading that served me well in the past is using pure mathematics and probability to determine price direction and and how far it's likely to move in a given time period I'm a programmer so coded a good probability indicator that worked 90% of the time but couldn't manage the risk side very well so eventually gave up on it after losing 10 months of gains in one bad trade.

[@Pstr1315]

Thank you for the amazing content! How about making a video about hostile takeovers?

[@zachb1706]

I'm so happy I found you through the plain donut

[@stevenmurphree]

I did a little quant research as a response to this video. Turns out it takes 305 likes and 129 comments to cut out the Gamestop questions on each video. Hi Stephen!

[@kenzilamberto1981]

Thank you for the videos, Mr Patrick Boyle! Do you have any videos showing a practical example of practising the quantitative analysis (at least those which has become outdated if you don't want to spill the current one that is working)? Thank you

[@soundariitd1332]

Excellent

[@Mcnish1824]

Thanks Mr.Boyle. Kindlly do another vids on the same subject of Quant Trading, with a different theme than History. Regards, :-)

[@MrLeo625]

Great channel 👍👍👍👍👍

[@bjjrhino]

Great video👍 Can you share with us the process of back testing an idea?

[@nunyabeezaxe2030]

Hey. I like DJ D-Sol's version of "Don't Stop."

[@liamh9814]

The Japanese warrant boom was also an important factor in the growth of Quant funds

[@thomas316]

I have a question. The Herbalife debacle, what did Bill Ackman/Pershing Square misunderstand about the business? It's interesting to me because Ackman has so often seemed ahead of the curve except but this one instance he dug in for about 5 years, endured not insubstantial losses and reputational damage as a result. Since then Herbalife has largely traded around the same price while Ackman has done very nicely.

[@orald7257]

Entertaining as always. With the proliferation of so many DJs and musicians, ever consider commedy on the side? Or KZbin is enough?