Trading the Stock Market in the Age of Algorithms

If you're an individual investor, day trader, or just new to the stock market, all the press coverage around algorithms and high frequency trading in the equity markets might feel intimidating, if not frightening. Why do companies race to have their algorithms trade nano seconds faster? What happened in the "flash crash"? How can a long standing trading firm lose $450 million in 45 minutes because of one bug in their code?

This class is for those who want to learn how modern markets use computerized trading, and what this new landscape means for you, an individual investor. As someone who both designed and managed automated computer trading systems, I will explain broadly how these strategies work, and what you should change, if anything, in your investing/trading approach.

Computerized high frequency trading is a topic that is for the most part completely misunderstood. While ostensibly complex, the purpose of HFT is to fulfill a basic function that has been around for centuries. I'll explain why for the average investor, HFT is not a zero sum game, and why for most market participants, high frequency trading can be beneficial. I'll go over the history of how computerized trading developed, how modern day firms think about it, why it makes money, and more. After this class, you will have an excellent grasp of what these systems do and what the strengths and weaknesses are.

Schedule
  • Trading the Stock Market in the Age of Algorithms

    Conference room in my apartment building

    635 West 42nd Street
    New York, NY

    The first phase of the class will consist of ascertaining experience (if any, none is needed) in investing and trading. We'll get a sense of how everyone in the session thinks about markets. With everyone having a diversity of goals and strategies with investing, I will design the material to be relevant to everyone.

    The bulk of the class will be primarily a lecture with handouts and examples that will make the material concrete.

    Afterwards, discussion of the subject among all participants will be heavily encouraged. 

    Topics will include:

    • Basic trading fundamentals
    • History and development of financial markets
    • How computer trading strategies are designed
    • Implications of HFT to your own investing
    • Implications of HFT to society¬†
    Oct
    16
    Tue, October 16th, 2012

    7:00 pm - 8:30 pm EDT

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Paul Chou

I've worked at some of the largest banks and hedge funds in the world. My experience includes analyzing fundamental credit and equity investments, equity derivatives, and most recently as a trader at Goldman Sachs where I developed, traded, and risk managed successful high frequency trading strategies.

I received two degrees from MIT, where I studied a combination of theoretical math, computer science, and finance. I taught several finance seminars at MIT, and enjoy teaching anyone who wants to learn about all aspects of finance, both theoretical and practical.

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New York, NY

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