Quantitative Investing Systems – Does It Work For Retail Investors

Quantitative Investing Formula Diagram

Quantitative investing represents an investing technique typically employed by the most sophisticated, technically advanced individual or firm. These firms operate lightning fast computers to find predictable patterns within financial data.

Generally, quantitative investing is implemented by individuals who specialize in the physics, math, computer science, or statistics. The summarized results of quantitative analyses, however, can be readily accessible to all who want to be quantitative investors, when presented in an intuitive framework.

An interesting CNBC interview on maintaining a level playing field for the average retail trader using their own home built quant investing strategy and large quantitative investing firms on wall street.

Maria Bartiromo introduced the story (view CNBC video below) by Bob Pisani, which focuses on a company called Equametrics, who specialize in bringing the power and technology of automated quantitative investing used by banks and hedge funds to the retail investor.

Successful investing comes with the discipline associated with automating a proven investment strategy, But I do not believe the average retail investor has the time or persistence to develop, test, and implement such strategies successfully. And even if they did, the big question is if these individuals understand the financial markets enough to create a quantitative investing system that will perform beyond the current trend, volatility level or economic environment before crashing? Is algorithmic trading for retail investors available?

Quantitative Investing Risk/Money Management

Taking things one step further why I feel retails traders should be very cautious when starting out building their own quant systems is their ability to manage risk.

Retails traders have much smaller position sizes making them small and nimble for moving their money around without affecting the overall market place. And because they are not a registered firm that must follow “industry standards” for risk levels retail investors become “sloppy” with how they manage positions and risk as a whole.

Risk/money management is the key to successful no matter if you are a day trading or running a quantitative investing system. If you do not have the ideal risk management implemented for a specific system a negative outcome will eventually arise.

To Quant or Not To Quant?

In short, basic off the shelf indicators like the MACD, Moving Averages, ADX etc.. are great tools that provide you with a quick snapshot of the current state of the market however; they typically fail miserably when applied to and automated quantitative investing system.

Over the last seven years I have been building and testing systems of all types from day trading to investing, trend versus cycles, have used most indicators and combinations along with many of my own unique indicators. I am very technical in nature and when I have my head set on an idea I always learn the entire topic, skill, tool or strategy before creating my own masterpiece.

Knowing what works and what doesn’t, and knowing the issues which will arrive going down a specific path is the key to building a winning quantitative investing system. While most think they can build a winning quantitative investing system. While most think they can build a winning system the reality is that almost everyone will fail unless they commit and dedicate 6000+ hours to understand all aspects of this process.

The Quantitative Solution for Retail Investors

The good news for investors who want to take part in this new lucrative way to invest is available and you do not need to know understand anything about the markets, programing or risk management.

A new automated quantitative investing service called AlgoTrades provides two proven automatic investing systems for individuals for a flat monthly fee. This low frequency investing system generates 1-3 trades per month and takes advantage of up, down trend, and even sideways cycling markets. So you never have to worry about riding the stock market roller coaster ever again.


Chris Vermeulen
Learn more here: www.AlgoTrades.net


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