Book Image

Algorithmic Short Selling with Python

By : Laurent Bernut
Book Image

Algorithmic Short Selling with Python

By: Laurent Bernut

Overview of this book

If you are in the long/short business, learning how to sell short is not a choice. Short selling is the key to raising assets under management. This book will help you demystify and hone the short selling craft, providing Python source code to construct a robust long/short portfolio. It discusses fundamental and advanced trading concepts from the perspective of a veteran short seller. This book will take you on a journey from an idea (“buy bullish stocks, sell bearish ones”) to becoming part of the elite club of long/short hedge fund algorithmic traders. You’ll explore key concepts such as trading psychology, trading edge, regime definition, signal processing, position sizing, risk management, and asset allocation, one obstacle at a time. Along the way, you’ll will discover simple methods to consistently generate investment ideas, and consider variables that impact returns, volatility, and overall attractiveness of returns. By the end of this book, you’ll not only become familiar with some of the most sophisticated concepts in capital markets, but also have Python source code to construct a long/short product that investors are bound to find attractive.
Table of Contents (17 chapters)
14
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15
Index

Summary

In this chapter, we set the context for the rest of the book. The stock market is neither an art form nor a science. Market wizards are not born, nor do they need to be supremely intelligent. They are forged in the crucible of adversity. The stock market is an infinite, complex, random game. The only way to win this game is to stay in it, by adapting your strategy to the market's infinite, complex, random nature, and to pick stocks and cut losses accordingly. In the coming chapters, we will consider how to incorporate short selling into your trading strategy, and implement techniques to improve your success rate and gain expectancy.

Market participants are generally less comfortable selling short than buying long. This is down to a number of technical factors, but also because of a general fear of the practice, propagated by the number of myths related to short selling. We will discuss and disprove these in the next chapter.