What Are Quantitative Trading Strategies?

Quantitative trading strategies are starting to be used widely among individuals and investment firms. These strategies encompass both simple and complicated algorithmic trading formulas to identify optimal investment strategies.

These quant trading strategies only take volume and price into consideration. By focusing strictly on supply and demand and by removing human emotions and errors quantitative trading strategies become the ultimate solution.

Quantitative trading strategies are nothing more than a computer crunching numbers to identify trading opportunities. Price and volume are two of the most common data points which these mathematical computations use. The only thing that pays trader and investors for that matter, is price. If price does not move in the favor of a position, then you lose money. So it only makes sense to follow price and statistical norms as much as possible.

There to major categories that quant trading falls into. First, there’s momentum trading and there’s mean revision. Momentum trading is nothing more than analyzing historical data in order to find a trend or pattern that can produce profitable trading results..

Mean revision analysis is a statistical relationship between current prices to the statistical trend reversion price basically means that when the current price is outside of its historical mean it should return to the average price.

Some of the most common tools used in quantitative trading strategies are indicators like moving averages, oscillators, standard deviation, and Bollinger bands. This is because these types of investors use averages, and standard deviation built into them. Of course this is the basis for building strategies.

All types of traders use these strategies. It does not matter if you are a day trader, swing trader or casual investor. Strategies can be create and built to help you navigate the market in a hands free way.

Long term investors are the least likely to use Quant strategies. But what most people don’t seem to recognize, is that it works just as well, if not better for larger moves in the market. There are futures trading systems that make huge annual returns this way. It’s true, they are slow and boring, but with above average returns and minimal trading commission costs, you can see why some investors are doing it.

While the terms algorithmic and quantitative seem complex in nature. The fact is they are simple and logical solutions to trading and investing. Simply stated, they mean that you have a plan and a rule-based strategy to follow in order to profit from fluctuations in the financial markets.

The advancement in information, technology, and trading platforms makes creating your own algorithmic quantitative trading strategies something the average Joe can now create.

In my opinion, only people who can trade or invest successfully are the ones who have a plan, stick to it and have enough cash to support their draw downs. If you have a system in place, and are able to limit losses without blowing up your account, you will do fine.

I am a simple and logical individual so quantitative trading strategies makes sense. Everyone should be trading with a plan if they want to achieve financial success.


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