It has been a year since I left behind the safe cocoon of technology development for the turbulence and chaos of the global financial markets, joining a prominent Indian proprietary trading firm where I traded American and European equity index derivatives. Though most people who knew me well were aghast (I was informed, in no uncertain terms, that I was ruining my life and my education :D), this was a deliberate, well-reasoned decision.
In many ways the world of financial markets is quite similar to that of entrepreneurship. Both call for much of the same character traits and skills – a taste for risk and gambling, the ability to pursue opportunities down dark alleyways, the ability to exploit one opportunity consistently whilst (I’ve always wanted to use that word – Go Chandler!) jumping nimbly to the next, possibly better one. Finally, success in both professions is determined to a significant extent by the whims of fortune.
Why, then, did I leave safety for danger, steady cash flow for volatile earnings?
Like any other young Indian of my generation, the capital markets had always fascinated me. With any other field, the rewards for excellent performance were not directly reflected in your bank account. This was different. As trained engineers, we were taught to worship at the altar of design. And, yet, looking at the ravenous nature of the markets, we dismissed the achievements of Soros and Buffett as statistical aberrations, Hamlets churned out by a million monkeys.
I had always wondered, however, if it was possible to create systems that were designed to sail the stormy seas of volatility and bring back treasures. Even if nine out of ten were to be shipwrecked and ruined, I thought, perhaps the remaining one would generate enough revenues to compensate for the others. I believed that my quantitative training would help me sustain an edge over competing traders. I was quite sure that I would be able to out-think the competition. The Fallacy of the Normal Distribution was to be my beast of burden and frequentist probability my weapon of choice.
So did I win? Did it work out as expected? You’ll get to know at the end of this series of posts.