I'd argue that a lot of the hard parts of algo writing are solved by Quantopian. Hard:
* Data. You need to test your idea. Most historical stock data (like Yahoo) excludes companies that went bankrupt or were bought or otherwise disappeared. That's called survivorship bias. If you run a backtest on the finance industry and you don't include things like Lehman, you're going to get the wrong answer. Add in things like Hurricane Sandy, MLK Day, 9/11, mergers, acquisitions, stock splits, etc. and data is very painful to put together.
* A backtester. Once you have you data, what do you put it into? How do you calculate commissions? How do you calculate slippage (your order affects the price, remember)? How do you avoid look-ahead-bias and other bugs that plague backtesters?
Coming up with an idea to trade is hard, but it's only a part of the problem. I'd say it's the most fun part of the problem, but it's only a part. Quantopian is trying to remove all of the hard parts and let you do the easy parts. We have tens of thousands of lines of code (backtester, IDE, etc.) and we're leaving the most exciting 100 lines of code to our members.
On the other question about books. I'd recommend a couple:
* Ernie Chan's book is a great place to start http://www.amazon.com/Quantitative-Trading-Build-Algorithmic...
* More advanced: http://www.amazon.com/gp/product/0470128011/
I work at Quantopian.
* Data. You need to test your idea. Most historical stock data (like Yahoo) excludes companies that went bankrupt or were bought or otherwise disappeared. That's called survivorship bias. If you run a backtest on the finance industry and you don't include things like Lehman, you're going to get the wrong answer. Add in things like Hurricane Sandy, MLK Day, 9/11, mergers, acquisitions, stock splits, etc. and data is very painful to put together. * A backtester. Once you have you data, what do you put it into? How do you calculate commissions? How do you calculate slippage (your order affects the price, remember)? How do you avoid look-ahead-bias and other bugs that plague backtesters?
Coming up with an idea to trade is hard, but it's only a part of the problem. I'd say it's the most fun part of the problem, but it's only a part. Quantopian is trying to remove all of the hard parts and let you do the easy parts. We have tens of thousands of lines of code (backtester, IDE, etc.) and we're leaving the most exciting 100 lines of code to our members.
On the other question about books. I'd recommend a couple: * Ernie Chan's book is a great place to start http://www.amazon.com/Quantitative-Trading-Build-Algorithmic... * More advanced: http://www.amazon.com/gp/product/0470128011/
I work at Quantopian.