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The Alchemists Of Wall Street

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Since Xu Shiwei first bought U.S. stocks into the bank in 1995, 26 years have passed since he has truly made a living from trading. In the past 26 years, Xu Shiwei has grown from the initial funding of several thousand US dollars to the current eight-figure transaction capital scale. In the past 26 years, he has spent more than ten years studying quantitative investment management, a veritable ten years of sharpening a sword.
This issue of "Hui Soul" magazine will take you into the trading story of the experienced trading master Xu Shiwei.

Ten years of polishing quantitative trading models

Xu Shiwei graduated from the University of Science and Technology of China in his early years, and later studied in the United States, where he obtained a Ph.D. in molecular biology from Rutgers University in New Jersey.
After stepping out of the school, Xu Shiwei went to Wall Street and worked as a biomedical industry analyst and securities investment manager in an investment company for many years, and he has been engaged in quantitative investment management for more than ten years.
Biology and financial investment are completely different fields, but Xu Shiwei has applied scientific research thinking to trading since the very beginning of U.S. stock trading. He regarded investment and trading as his second doctoral dissertation. The topic of this paper is how to achieve long-term stable profitability in a risky market.
In order to study this subject, he first collected and learned various theories and methods of well-known traders; secondly, he comprehensively learned his own ideas and hypotheses; then, he established a quantitative model and tested the results of the model with historical data; Finally, the effective quantitative model is applied to actual transactions for verification and improvement, and this has formed a mature and robust quantitative operation model with relatively high returns and risks.
The process of exploring quantitative trading is very long, and at the beginning he was ignorant; after first glancing at the door, he encountered the problem of having a balance between risk and return. The whole process is very difficult, often a key point is difficult to achieve success without countless attempts. Xu Shiwei said: "If I didn't have the long-term training during Ph.D., I might not be able to stick to it." Having said that, he still appreciates this long groping experience, because he believes that many things in the transaction will be incomprehensible without personally. And execute thoroughly.

Grow amidst success and failure

In 26 years, Xu Shiwei has experienced a lot of losses and profits. His first profit came from holding Intel’s stock for a long time, and his profit was more than twice; and his first loss came from holding PeopleSoft’s stock, because the company’s quarterly report did not meet the expectations of Wall Street investment banks, resulting in The price of this stock fell by 30%, and he suffered as a result.
The biggest profit in Xu Shiwei's trading career came from the leveraged arbitrage gains of the British Pound and Japanese Yen from 2004 to 2006. In the two years before the maximum profit, he sold options to short the market because he subjectively believed that the U.S. stocks had bottomed out. However, because of the market volatility, he made a big loss. This was the biggest loss on his investment path.
Xu Shiwei's trading products cover a wide range, including U.S. stocks, A-share indexes, precious metal ETFs, and currency trading.
At the beginning of 2000, the US Nasdaq technology stock bubble was nearing its peak. At that time, Chinese engineers working at Lucent Technologies continued to be optimistic about Lucent’s stock and believed that long-term holding of Lucent was a good investment strategy; at the same time, a Chinese restaurant The waiter also said that she bought popular technology stocks such as Yahoo, AOL, and Pet.com. Everyone wanted to rely on these stocks to earn enough money to retire in advance. But it turned out to be counterproductive, and then technology stocks plummeted and everyone suffered heavy losses.
This incident made Xu Shiwei very unforgettable. The lesson he learned from this is that the general perception of most stockholders is often biased, the market is changing rapidly, and the hot stocks in a period of time do not mean that they are hot in the long term.
Another thing that impressed him deeply was that in 2002, he was very proud of the British pound and yen market, and a TV interview with Jim Rogers saved him from a huge loss.
Rogers said in an interview: "Carry Trade is a high-risk investment method that may cause large losses." These words awakened Xu Shiwei, who was earning a red eye at the time, and made him realize The reversal of market trends in arbitrage trading will bring great risks. After that, he gradually withdrew. Before long, the pound and yen plummeted from around 240 points to around 122 points. He was very fortunate that he had listened to Rogers's advice and avoided a huge liquidation.

Internalize the transaction core to the quantitative model

When it comes to what qualities a good trader should have, Xu Shiwei believes that it is most important to look at the market objectively and adapt to circumstances.
The risk market is always changing, and changes happen at any time. Traders need to always maintain an objective and neutral attitude towards the market, do not subjectively predict the future that is too far away, and do not dwell on the past that has already occurred, as long as they do what they should do now, the general direction will not be wrong. Just like the principle of calculus in mathematics, it is only a small part of the calculation right now, and continuous accumulation can be infinitely close to the fact.
Xu Shiwei believes that the objectivity of the transaction is also reflected in the very strict and timely risk control principles. Always keep the account equity at a new high or close to a new high; avoid holding positions being trapped, because once the price drops, it will fall like a bucket of water.
Quantitative trading model yield curve
Xu Shiwei's quantitative trading model is a low-frequency quantitative trading based on market data. For example, his quantitative model will track and analyze the actual transaction data of the US S&P 500 stock index futures to grasp the flow of funds in a timely manner. When the market prefers risky assets, he holds stock index futures, CFDs, and stock index ETFs; when the market prefers safe-haven assets, he turns to holding cash.
His quantitative model will also make reasonable response plans for various situations that may occur in the market. Once the market changes, it can react in a timely manner, so as to ensure that there will be no surprises in daily trading operations.
In addition, take profit and stop loss are one of the preset built-in mechanisms in his quantitative model. For him, once the quantitative trading model sends out a hedging signal, he will immediately close the position and stop the profit or stop loss.

Talk about the financial market under the epidemic

After more than 20 years of ups and downs in the trading market, Xu Shiwei is very satisfied with his current trading status, comfortable and confident. In the buying and selling operations, there is no longer a sense of hesitation and anxiety, only the signals of the quantitative model need to be traded.
Regarding the global financial market under the new crown epidemic, Xu Shiwei suggests to focus on the US stock index, because the US government and companies are currently pushing the stock market to continue to expand, and the latter part of the bull market, especially the end of the bubble, is often the period when the most profit can be obtained. He also reminded traders to be aware of advances and retreats in order to retreat before the bubble bursts.

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