Laurent Bernut - Algorithmic Short-Selling with Python: Refine your algorithmic trading edge, consistently generate investment ideas, and build a robust long/short product

Algorithmic Short Selling with Python

Refine your algorithmic trading edge, consistently generate investment ideas, and build a robust long/short product

Laurent Bernut

BIRMINGHAMMUMBAI

Algorithmic Short Selling with Python

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Producer: Dr. Shailesh Jain

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First published: September 2021

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Since 1996 I have actively and publicly advised investors in the use and execution of a long/short trading strategy well known as trend following. Long/short. That's two words. But amazingly, after all these years, too many investors and traders miss out on the short side of what I do. They see the word short. They perhaps even know what it means, but they stay fixated on the long side. Bull markets drive the emotional, visceral side of us human beings, and people can't get enough of the idea that they could be on board with the next Apple, Tesla, Amazon, or Bitcoin at some cheap price. In theory, instant riches as the next one goes to the moon!

This lack of focus on the short side is rather odd. We all saw The Big Short. Michael Burry shot to massive fame through that spectacular short trade. We all admired his call during that chaotic period of time. So we all know that epic up moves often have epic down moves. Moonshots don't stay at the moon. They can crash to hell. Do your quick boom bust market history. Scan the charts. My views are not breaking new ground. But where is The Big Short II? Was Burry just lucky on that one particular short trade? Doubtful, but I'm not sure, and nor are you, I imagine. That said, I want repeatability. I want a strategy that can survive for decades.

My life first intersected with a dedicated short seller in 2012 (not too long after Burry's infamous trade), when Laurent Bernut, a short trader based in Tokyo, reached out to me with a speaking opportunity in Tokyo. I took that opportunity and it quickly expanded into a speaking tour across Asia. Twenty cities, ten countries, and I was hooked on Asia. I have lived there since. Cheers to Laurent for being a part of chaos theory! Now, you might not think that this professional relationship was a match. I was coming at trading from a systematic trend following perspective and Laurent was coming at trading through a systematic short perspective. The key word though is systematic. And a systematic approach is aimed at one thing: repeatability.

Let me go off on a tangent for a moment. When legendary trading author Jack Schwager recently came on my podcast to promote his new book, it was a no brainer for me to have him on. Now, even though Jack knows I have a trend following bias, he also knows I have an open mind. I knew that when he wrote about a series of unknown traders, he had vetted them and their strategies thoroughly. The common denominator, just like with Laurent and I, was a fixation on systematic and repeatable strategies.

This brings me back to Laurent's new book, Algorithmic Short Selling with Python. In it, Laurent conveys a determined passion for the short side that has driven him for over a decade. He sees the opportunity, and knows the value in a systematic short side bias. His book, the one you're reading right now, brings excruciating detail and the transparency traders will need to excel on the short side as well as the long side.

From choosing to enter or exit a position, to managing risk and position size, to visualizing and managing a whole portfolio, Laurent breaks down the process and psychology behind developing an effective long/short trading strategy. He also includes versatile source code in Python, which can be implemented on any stock, in any market, with the sole intention of limiting loss, and yielding above average returns. That's all you can ask for from a teacher. Show me all you know. Give it to me straight and hold nothing back.

Now it's up to you to take Laurent's hard work and go apply it.

Michael Covel

Author of Trend Following and TurtleTrader

Laurent Bernut has 2 decades of experience in alternative investment space. After the US CPA, he compiled financial statements in Japanese and English for a Tokyo Stock Exchange-listed corporation. After serving as an analyst in two Tokyo-based hedge funds, he joined Fidelity Investments Japan as a dedicated quantitative short-seller. Laurent has built numerous portfolio management systems and developed several quantitative models across various platforms. He currently writes and runs algorithmic strategies and is an undisputed authority on short selling on Quora, where he was nominated top writer for 2017, 2018, and 2019.

John McLaughlin, your authentic mentorship manifested this book. Michael Covel, thank you my friend. Grand merci to my editors Ed Doxey and Sofien Kaabar, and to Dr. Shailesh Jain, who believed in this project. Scott Phillips, I love you. Sincere gratitude to Franklin Parker, Douglas Marsh, Andrew Swanscott from the Better System Trader podcast, Alex Ribeiro Castro, Nitesh Khandelwal, and Wazir Kahar. Thank you also to Victor Haghani. Last, but first in my heart, thank you to Jules and Alizee for your loving inspiration.

Sofien Kaabar is an institutional market strategist with a focus on technical and quantitative strategies. Having graduated from SKEMA business school in Paris and with a background in trading and research, he is currently focused on trading automation and strategies.

I would like to thank my family, especially my parents, who are always on the front line for me and my two sisters, as well as my fiance, Charline, who tolerates my excessive working time.