User Question

From BossG:

Hi LargeCapTrader,

Could you write a post about the tools you have used in your trading career? i.e. matlab (with what data feed?), trading platforms, etc. Any info on what the pro’s use or opinions would be great.

Keep up the great work!

First off, thanks for the comment and if you’re ever in NYC I owe you a beer! Here’s a brief overview of software that I’ve seen, used, or know for certain are used on Wall Street:

Statistical Analysis, Back-Testing, Research:

R and Matlab are used fairly extensively, I would wager that R has a slight edge over Matlab in terms of use but then again it could be 51% versus 49%. The main drawback for both is the difficulty in porting to execution which is usually in something like C++ or a low level programming language. I hear Python bought up more often due to easier translation into execution.

The fund I worked at was mid to low-level in terms of AUM for a Hedge Fund without a large budget for software. I’ve used SmartLab, WealthLab, TradeStation, Amibroker, MetaTrader, & Excel (hopefully not forgetting anything). I utilize TradeStation, Excel, & WealthLab in that order. Tradestation just due to the extreme simplicity and turnaround of an idea, WealthLab for portfolio level testing, and Excel for everything else (options strategies). To be honest I know of only a handful of other firms and CTA’s that utilize retail software such as the ones mentioned. There are drawbacks to each however most of these have been identified and solutions provided by the vast community that supports these products. For example there is a cheap 3rd party application that can link TradeStation to MatLab if your looking to utilize some of the advanced maths. I’ve never used it but I’m sure there is a trial.

Execution Software

Redi Plus, Sterling Pro, IB TWS, and various other customized software from who knows what broker that I’ll likely never use again. None of these struck me as very great besides IB’s TWS. But IB’s customer service is so atrocious, that alone makes me hesitant to say too many positive things about them. The UHF traders though probably spend a great deal time more focusing on execution, it was one thing I was glad not to have to do. One small automated strategy we had provided by a 3rd party source was so massive mostly on account of the layers and layers of error checking, for a strategy who’s trading logic was only a few lines of code. Large hedge funds still prefer their traders can code the basics to hand off to a more skilled software developer for actual deployment. I was at a fund with the happy medium size where we could afford to outsource programming when needed and was glad of it.


This was actually the biggest obstacle to most of our research. High frequency data is expensive and difficult to handle. FX data from most retail sources are unreliable due to the fragmented nature of the marketplace. Revisions and survivor ship bias make fundamental analysis very difficult. Most of the above retail sources suffer from mixed quality data, that was a major reason we stayed away from very high frequency systems and traded mostly from the 5 minute to Daily frequency.

I have made a concerted effort to switch focus on daily data, I find it somewhat ‘easier’ to forecast and the expected gain is large enough to compensate for the bid/ask spreads and commission of options. Hopefully this answered your questions but please feel free to follow up if you have specific questions.

~ by largecaptrader on October 28, 2009.

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