I wish you make many happy returns ..
Here is more on Paul Tudor.. this is trading ,, nite JEB,,
WALL STREET'S HOTTEST HOT ROD
"Now we enter the Boolean time-series con-ditions here," says Dave Hirschfeld, tapping at his keyboard. A three-dimensional shape appears on the screen, blue foothills and valleys mappedagainst a black-and-white grid, with a sizable crater in the middle. "That's the '87 crash," says Hirschfeld, who is head of research for Tudor Investments and president of Tudor Software for the legendary futures trader Paul Tudor Jones. "We can zoom in on that tick by tick if you want," Hirschfeld says as another shape appears. "Here's London"--click--"Tokyo"--click--"Frankfurt."
This is Wall Street's hottest piece of technology. Rivals refer to it as "Tudor in a box"--the brain of Paul Tudor Jones shooting off sparks in a vat. In fact, the system, in development since February 1990, is a highly sophisticated analytical tool that combines approximately 50 data streams, embracing markets from currency to cotton, every 15 minutes, every trading day, back to 1982 and before. "In 20 seconds you can use this to dismiss statements that have a lot of logic to them but no reality,"says Rich Jaycobs, former head of technology for Tudor Investments, as he presses a button and instantly disproves the conventional wisdom that the currency market is unusually volatile this year.
Even more dazzling are the analytics that can say in second show to pursue a given strategy with the least risk and the greatest chance of profit. "We all have our views of the world," Jaycobs says. "This tells you what is the cost of your view."
One Tudor employee--who declined to be named--describes the system. "The idea was to model an expert system based on Paul's knowledge and his trades in the market," he says. "The genesis came from the chess program developed at Carnegie Mellon, Deep Thought, which beat chess champion Gary Kasparov. We recruited several Carnegie people. We went to Paul: We reviewed his past trades. And then we'd say, "Okay, here's a market, what would you do?' We'd then take what he did and see if it applied to other markets, and so on."
All futures trading is based on the belief that past performance is predictive--that if 20 times over the past 20 years a Fedrate increase coupled with a rising dollar pushed up the price of coal in Germany, which in turn pushed down the price of German utility stocks, then the same variables, behaving in the sameway, will produce the same result. One might, then, short German utilities.
This illustrates the potential advantage of computerized trading systems over their human counterparts: the ability to instantaneously calculate the effect, on a historical basis, of the innumerable variables--political, environmental, economic, psychological, etc.--that affect the odds of a given trade or investment paying off.
Not everyone agrees with this. As the late Fischer Black, a partner at Goldman, Sachs and one of the fathers of modern optionstrading, told The Economist, "There are things that machines are good at, but trading does not appear to be one of them....The list of factors that matter are changing all the time."
To a limited extent, Peter Borish, who developed the system at Tudor before leaving to found Computer Trading Corp., would agree. "Paul Tudor Jones, Louis Bacon, and the other hedge-fund heads take a big speculative position, but they're actually not risking very much," he says, because they have an extraordinary ability instantly to intuit the likely impact of a given piece of news, or a market move, on the minds of several thousands of their trading peers. This is something that may never be matched by a machine.
Risk and leverage, on the other hand, can be usefully modeled, and applied by the push of a button. "Someone like Paul doesn't make one trade always based on the same things," Borish says."So we tried to break it into subsets, to model different ideas. And if that was successful, you could put different ideas into a portfolio and devise an allocating scheme to weight which ideais a little bit better at which time."
After that, you have to trust your program's calculations."If someone told me--and believe me, I've heard everything--that the phases of the moon affected the soybean market, I can run a historical data series of new-moon and full-moon soybean prices," says Borish. "If there's any statistical significance to that, and if the risk-reward is there, I'd probably trade off it."
--David Samuels
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