The Gateway to Algorithmic and Automated Trading

Financial wanderlust

Published in Automated Trader Magazine Issue 31 Q4 2013

Andrew Auerbach began trading at university and soon realised he'd found his calling. Starting with simple long-only blue chip positions, his strategies became progressively more sophisticated. Now head of Auerbach Group, this young American fund manager is embarking on his most adventurous journey yet as he starts an algorithmic trading fund in Brazil.

“For me the intellectual pursuit was a really key motivating factor. There are obviously a lot of different strategies that work in the market, but for me what’s really interesting is to see new areas that haven’t been explored... ”

"For me the intellectual pursuit was a really key motivating factor. There are obviously a lot of different strategies that work in the market, but for me what's really interesting is to see new areas that haven't been explored... "

Adam: Let's begin with how you got your start in trading.

Andrew: I began trading when I was studying business. I started out with my own money, which I had earned from working summers and during high school. I did very well with that, expanded to family and friends of family, and then ultimately in the second semester of my freshman year I had consistently done well enough that I decided to withdraw from university and start a firm. That was before Harvard (when I went back to university).

The rule of thumb was buy blue chips and read the Wall Street Journal; a very fundamental style. My strategy was to be constantly looking for new opportunities, to not just go with what books would say. So ultimately I came from blue-chips long-only, to tech stocks on NASDAQ, and then to short-selling and trading on margin, and then to options in order to get leverage. Then on to option strategies where the strategy was using options as a vehicle for more precisely defining the risk. From there I got into automated trading as I started to see interesting things in the derivatives markets.

Adam: Do you feel there was an element of luck involved?

Andrew: There was absolutely an element of luck. I don't deny that. Very easily that element of luck could have been against me, and I don't know what I would be doing now - but something very different.

Adam: In your first trades, did you have price targets or any kind of system?

Andrew: I basically said, okay this exceeded my expectations, so I'm just going to cash it in and try something new, keep going and see what I do right, what I do wrong, how I could improve. For me the intellectual pursuit was a really key motivating factor. There are obviously a lot of different strategies that work in the market, but for me what's really interesting is to see new areas that haven't been explored, areas that have more challenges and opportunities.

Adam: What was the turning point where you decided this is what I want to do now?

Andrew: As my success gradually continued in trading, my motivation for school gradually declined. The original plan was that if I lost 30% of the initial capital that I began trading with I would call it quits, continue focusing on university and if I succeeded then I would cross that bridge when I got there.

Adam: Once you decided this was what you wanted to do, how did you go about getting the knowledge and information you needed for the more difficult aspects?

Andrew: It's mostly self-taught. There were research papers, books, and trial and error. Trial and error was definitely the most useful for me. I found there's a lot of good information out there. But in general there's also a lot of misleading and false information on how to make money in the stock market. So I found that trial and error was really the only one I could depend on to reliably learn.

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