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

This entire book has led to this and the next chapter. In summary, to put together all we have covered in the preceding chapters, switch to relative series and triage with the market regime. Enter short after a swing high or long after a swing low. Set a stop loss above or below the swing and a target price to reduce risk. Calculate your position size using your cost, stop loss, and risk budget.

Keep a separate risk budget for each long/short side of each strategy. Honor your stop losses and respect your strategy. Keep a clean trading journal. Refine your mandate along the way.

In the next chapter, we will be looking at one of the most underrated tools in your arsenal: your portfolio management system. Being a stock picker and a portfolio manager are two distinct jobs that require different skill sets. The moment you chose to manage a portfolio, you are no longer a stock jockey. You have become a stable master. Your job is not to cross the finish line on horseback...