Why do people trade?

Financial Trading in R

Ilya Kipnis

Professional Quantitative Analyst and R programmer

What is trading?

  • The act of BUYING or SELLING an asset

BUYING $\rightarrow$ tangible product

SELLING $\rightarrow$ financial security

  • Cash $\rightarrow$ product $\rightarrow$ cash (hopefully making a profit!)
Financial Trading in R

Why do people trade?

  • To make a profit
  • To take on, offload, and hedge financial risk
  • To protect a company from commodity price movements

  • Systematic trading: risk/reward payoff is favorable enough to bear the risk
1 https://www.cntraveler.com/ 2 https://qzprod.files.wordpress.com
Financial Trading in R

Types of trading

  • Divergence (or momentum, trend trading): The movement of a quantity will continue in its current direction

  • eg CTA (commodity trading advisors)
Financial Trading in R

Types of trading

  • Convergence (or reversion, cycle trading): The movement of a quantity will eventually reverse

  • eg Warren Buffett
Financial Trading in R

Let's practice!

Financial Trading in R

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