Quality Money Management : Process Engineering and Best Practices for Systematic Trading and Investment

88 CHAPTER ◆ 8 Describe Trading/Investment Idea

● Begets new learning.

● Facilitates self-criticism and peer review.

● Eases the organization of ideas and makes possible the organized storing of knowledge.

● Helps researchers remember.

● Allows researchers to find larger patterns and interrelationships among otherwise

disparate concepts.

● Facilitates transparency, enabling product teams to easily communicate with inves-

tors or regulators regarding the objectives, strategies, and risk factors of the trading/

investment system.

Engineers spend 50 to 70% of their time communicating, but as the President ’ s

Science Advisory Committee expressed years ago “ many American scientists and tech-

nologists can neither write nor speak effective English. ”^1 If you cannot communicate

well, you will not get investors, and you will have product team members (from differ-

ent functional areas) with different understandings of key concepts (sometimes the same

problem can be viewed from two completely different perspectives), spiraling out of con-

trol. (The famous old woman/young woman illusion shows how two people can look at

the same thing in different ways.) The team leader must also communicate clearly verbally

and in written form as to what each team member is responsible for over the ensuing loop.

FIGURE 8-2

Beginning with the Money Document as the project ’ s initial scope and vision, new addi-

tions to this core document (the original Money Document should not be discarded) will

define the visions and scope for each loop through Stage 1. Market opportunity originally

drove the description and the evolving description will guide iterative research into quan-

titative methods and business rules that will satisfy that opportunity. In this way, the prod-

uct team can assess the nature, scale, and complexity of the work to come. The vision and

scope should clarify the objectives and boundaries of the loop, including what and what not

to research and build. By Stage 3, this evolving description will in the end fully articulate

the trading/investment system in all of its mathematical and technological complexity.

Although one could argue that time spent documenting trading/investment system

specifications reduces the time available for discussion and further research, it improves