- In reality, trading for profit has always been a difficult problem to solve, even more so in today’s fast-moving and complex financial markets. Electronic trading allows for thousands of transactions to occur within a fraction of a second, resulting in nearly unlimited opportunities to potentially find and take advantage of price differences in real time. In a perfectly efficient market, buyers and sellers would have all the agency and information needed to make rational trading decisions. As a result, products would always remain at their “fair values” and never be undervalued or overpriced. However, financial markets are not perfectly efficient in the real world. Developing trading strategies to identify and take advantage of inefficiencies is challenging. Even if a strategy is profitable now, it may not be in the future, and market volatility makes it impossible to predict the profitability of any given trade with certainty. As a result, it can be hard to distinguish good luck from having made a good trading decision.
- This is a personal application of Principle Component Analysis on Jane Street Kaggle Competition. Please download the dataset on your own.