90 CHAPTER ◆ 8 Describe Trading/Investment Idea
● Maintaining a catalog of documentings and sources. We recommend you build a consol-
idated knowledge database with references, and, even better, employ a wiki-style tool.Writing supports thinking, not just by helping you understand better what you have
found, but by helping you find in it larger patterns of meaning.
One purpose of researching a trading or investment strategy is to increase the store of
knowledge, and so even the very best work is useless if the firm cannot store it, retrieve
it, and effectively communicate it to the rest of the firm. Building and maintaining a pro-
prietary library of unique quantitative methods is a key to long-term success.
In summary, writing is important. Cognitive processes involved in writing, from making
simple flowcharts to analyses of complex financial data, shape all aspects of trading/invest-
ment system design and development. Notes and documents evolve into written descriptions
and deliverable documents. Describing trading strategies in written form, though, is difficult,
primarily because the process is not a one-for-one, step-by-step march through the logical
processes undertaken during research. Rather, the process of describing trading/investment
system details is an attempt to guide the logical processes of the team leader, top manage-
ment, investors, and even potential regulators to an understanding and acceptance of the
team ’ s conclusions. In the end, descriptions are read by others and writing for others demands
more than writing for ourselves.^6 From the perspective of these readers, there is a clear con-
nection between the quality of documentation and the quality of the underlying research.8.1. Writing Descriptions Effectively
Documenting is worth doing, and if it ’ s worth doing, it ’ s worth doing well. A well-structured
description of a trading/investment system should begin with the high-level overview of
the strategy from the Money Document. From there, the body of the description should
detail specific equations and business logic necessary to implement the strategy. While the
high-level overview remains fixed, the specifics of the implementation, described in the
body, will evolve as the team spirals through Stage 1. Teams should organize the content
thoughtfully, not starting with a mass of details and citations and photocopies, hoping that
readers will somehow devine relevant parts.
For each subsection of the description, we recommend writing a brief introduction
that describes its organization and what is in each part. It need not be a Ph.D.-level dis-
sertation; the readers may often be less sophisticated quantitatively, either junior-level
analysts, managers, or lay investors. Sections should include:● Trade selection algorithms for both position opening and closing.
● Trade execution algorithms.
● Position and risk management logic.
● Base-level performance statistics and metrics.Subsections may be as short as a sentence. Also, readers have not spent as much time
with the paper ’ s structure and content as the team has, so helping to orient them is always
beneficial. We recommend:● Be brief, but be complete. Try to use shorter, more direct phrases whenever possible.
Give facts in the form of:- Bullet points.
- Short paragraphs to provide overviews and link subjects.