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

Regardless of the asset class, there are only two strategies

Jack Schwager often points out that there is no universal holy grail. Market wizards come in all shapes and forms, sometimes even with contradicting strategies. They have one thing in common though. They excel at managing risk and controlling losses. They consistently focus on the downside. Winning positions take care of themselves. Market participants' job is to take care of losers.

Market participants usually define themselves by "what" they trade (asset class, markets, time horizon), rarely "how" they trade. Regardless of the asset class, there are only two types of strategies: trend following and mean reversion. The reason why there are only two strategies is not entries but exits. How you choose to close a trade determines your dominant trading style. The mean reversion camp closes early when inefficiencies are corrected. The trend-following crowd loves to ride their winners. A classic example...