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Chan's encounter

Published in Automated Trader Magazine Issue 13 Q2 2009

We’ve met Ernest P Chan before, back in the Q2 2008 issue, when he wrote about combining machine learning and regime switching to achieve profitability. Here, he tells us the story of an encounter with MATLAB that has transformed his order execution. Do you know how to use MATLAB as an automated execution system?

Many traders are familiar with MATLAB as a powerful software platform for backtesting trading strategies. This is especially true for those who would like to analyze and trade a large number (maybe thousands) of stocks simultaneously. MATLAB is a language that is built around matrix manipulation and processing, so many calculations involving multiple stocks are just as easy as calculations involving a single stock.

In my book Quantitative Trading (Wiley 2008), I have described a number of example

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