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

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Describe Trading/Investment Idea

When people think, they make errors. Human thought processes are inherently bad.

(Research shows convergence of error rates in all human cognitive activities.) In all

stages, our methodology attempts to force thinking, and to test that thinking to find and

prevent errors. Before research can begin, planning of the research and knowledge man-

agement strategies will speed the path to successful strategies and root out errors. (The

step following this one, Research Quantitative Methods (K|V 1.2), will fulfill research

goals by surveying and benchmarking quantitative methods and business rules.) Now,

while most financial engineers, traders, and portfolio managers (i.e., inventors) are con-

ceptual thinkers, trading systems are linear constructs, and planning, documenting, and

communicating trading system details must be done linearly. As a result, good research-

ers plan and conduct their work only with the help of writing, and writing they do right

from the start; they do not wait until after they have gathered all their sources and data.

Documenting research forces clarity and understanding with the purpose of communi-

cating specific ideas linearly. Documenting, and doing it well for all of the documents

produced over the course of design and development, is important because it:

● Forces clarity, linearity, and objectivity between members of a cross-functional team.

● Demands that researchers think logically and exposes faults.

CHAPTER ◆ 8

Research

quantitative

methods

Prototype

in modeling

software

Design and

document trading

strategy

Check

performance

Describe

trading idea

1

2

3

FIGURE 8-1