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Presented by Henry Carstens
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
Quantiacs Q6 Algorithm Trading Competition
• Entry Requirement: Futures Trading Algorithm
• Submission Deadline: July 31, 2016
• Simulation Period: 3 Months
• Winner Announcement: November 2016
• Guaranteed Investments: $1 million, $750,000, and $500,000
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
© Henry Carstens www.henrycarstens.com
What will win the Quantiacs Q6 Competition?
An
Idea!

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Creating Trading Ideas for Q6
© Henry Carstens www.henrycarstens.com
“The most neglected area of development
among traders is creativity. We focus on
executing trades and managing risk, but rarely
work on expanding our creative capacity to
generate ideas.”
—Dr. Brett Steenbarger

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Creating Trading Ideas for Q6
Agenda & Objectives
Objective:
• Learn how to create unique trading ideas
Q&A
• Answer your questions about trading ideas
• Let’s hold questions to the end
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
Henry Carstens
20+ years as a quant, strategy developer, portfolio
manager, and proprietary trader
Degrees in mathematics, economics, and physics
Author of
101 Trading Ideas: A Magical List For Fast-Paced Alpha Hunting
Email: hcarstens@henrycarstens.com
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
Idea
Trading Strategy
Trading Rules
Test
Alpha?
Submit
© Henry Carstens www.henrycarstens.com
Idea Hunt: from Idea to Alpha to Q6

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Creating Trading Ideas for Q6
Scan, Pause, Idea…
Scan, Pause, Idea…
© Henry Carstens www.henrycarstens.com
“The way to get good ideas is to get lots of ideas
and throw the bad ones away.”
—Linus Pauling

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Creating Trading Ideas for Q6
© Henry Carstens www.henrycarstens.com
First Step: Get a Lot of Ideas!
The Game of Telephone
The List
The Ideas

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Creating Trading Ideas for Q6
© Henry Carstens www.henrycarstens.com
• 101 impersonal trading ideas that trigger user-specific
trading ideas, from impersonal ideas to rich, robust
personal ones.
• Triggered ideas contain the user’s unique knowledge,
experience, and intuition.
• The list can be used by anyone, from novice to veteran,
to generate unique trading ideas.
• The list can generate ideas in any timeframe and in any
market.
• There are 17 fully disclosed example strategies in the
book and on the website that would make great starter
strategies for you own alpha hunts.

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Creating Trading Ideas for Q6
1. Trade the path to the outcome.
Trade the path to the outcome, not the outcome itself. Trade
standard deviations instead of price.
2. Trade a relationship.
Build tools to identify when relationships are ebbing and flowing.
Buy strong relationships and sell the weak ones.
3. Trade randomness.
Is there a time of day that seems particularly aimless? Trade the
randomness of that time of day.
4. Trade tomorrow.
Where is the most information for tomorrow? How do you put it to
work?
5. Trade a recurring event.
A recurring event can be either a fundamental or a seasonal event.
The Weekly Petroleum Status Report and the Monthly Employment
Situation Report are examples.
© Henry Carstens www.henrycarstens.com
6. Trade an orbital or orbit.
Is an electron orbital or a planetary orbit similar to price orbits in the
markets? Create a chart that identifies regime changes and new price
orbits.
7. Trade volatility.
Change your style based on volatility. Does more volatility mean more
or less trending? What about more or less randomness?
8. Trade already-priced-in.
If today’s price is already accounted for, trade what is pricing-in instead.
9. Trade convert prices.
Convert all prices to another currency or commodity.
10. Trade retail traders.
What are retail traders doing? Are they doing it alone while everyone
else is on holiday? Do they have to put the market back when they are
done?
Some Trading Ideas

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Trade the path to the outcome.”
2) A triggered idea, “What happens after a big move?”
3) This strategy trades big moves in crude oil.
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Trade an orbit.”
2) A triggered idea, “What does the tail of a candlestick mean?”
3) This strategy trades tails of candlesticks in natural gas.
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Trade tomorrow.”
2) A triggered idea, “What is the short term relationship
between gold and the 30 year bond.”
3) This 1 day strategy trades that relationship.
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Convert prices.”
2) A triggered idea, “What is the relationship of the price of
copper in gold and the price of copper in crude oil?”
3) This strategy trades copper priced in gold and copper priced
in crude.
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Find the signal.”
2) A triggered idea, “How do traders position for the Weekly
Petroleum Status Report when the prior report created more
noise than signal?”
3) This strategy trades crude oil but signal and noise apply to all
markets
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
List, Idea, Strategy
1) List says, “Pantheon.”
2) A triggered idea, “If crude oil and natural gas are viewed as
old-world gods, what does a fight between them look like?”
3) The fight is represented by crude oil and natural gas going in
opposite directions. Extreme prices denote the climax of the
fight, and declining volatility a sign that the gods are getting
tired.
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
© Henry Carstens www.henrycarstens.com
Illustration # and Title Win %
Average
Trade ($)
Z-score
Profitable
Years
1 Crude Oil 1 55 1,880 1.5 9
2 Crude Oil 2 63 510 2.2 8
3 Crude Oil 3 57 230 2.3 8
4 Crude Oil 4 51 250 3.0 9
5 Natural Gas 1 53 291 2.8 8
6 Natural Gas 2 56 326 1.8 9
7 Natural Gas 3 56 574 2.2 9
8 Natural Gas 4 55 676 2.4 7
9 Copper 1 57 206 2.3 8
10 Copper 2 58 498 2.3 9
11 Copper 3 61 1,414 3.1 9
12 Copper 4 51 313 2.6 9
13 Copper 5 80 365 4.0 10
14 Gold 1 55 154 3.0 10
15 Gold 2 67 727 3.0 9
16 Gold 3 59 271 3.2 10
17 Gold 4 67 1,164 2.4 9
17 Starter Strategies from
101 Trading Ideas

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Creating Trading Ideas for Q6
Recap - How to Win Q6:
• Have Lots of Ideas
• Scan, Pause, Idea…
• Make Q6 Magic Happen
© Henry Carstens www.henrycarstens.com

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Creating Trading Ideas for Q6
Q&A
“The book you’re about to read is far better than 101 trading ideas. It’s 101
ways to develop trade ideas.” Brett N. Steenbarger, PhD
• Contact Info
Quantiacs: www.quantiacs.com
Quantiacs Idea Code: https://github.com/Quantiacs/HenryCarstens-101-Trading-Ideas
Henry Carstens: hcarstens@henrycarstens.com
101 Trading Ideas: henrycarstens.com/101-trading-ideas/
© Henry Carstens www.henrycarstens.com