Interests in quantitative trading strategies have noticed a sporadic rise in the last couple of years. This unprecedented reception by the trading class is primarily because of the inexpensive setup costs, and convenience. Quantitative trading strategies are also referred to as “algorithmic” or “automated” trading strategies.
Quantitative trading now has an established industry with a sizable turnover, and a beaming number of developers and clients. Clients of the service include active traders and investment companies.
Features of Quantitative Trading Strategies
- Exploits the use of an automated electronic process
- Has a stringent set of objective rules and guidelines
- Exploits basic data points such as quantity, price, and timing of each trade to create an easy-to-manage trading system
- Has a proven track record of success with large trade volumes over short periods of time
Benefits of a Quantitative Trading Strategy
- Firms are able to balance the market and reduce the chances of error, making for a solid risk management plan
- Takes out the drawbacks of human errors that may cause issues or delays, ensuring that the market moves seamlessly since trades are placed automatically
- Leads to cost optimization of market dealing for all parties, allowing for increased efficiency of trading by cutting overhead cost and freeing up capital for developing more sophisticated strategies
Quantitative trading now allows for huge orders to be split into smaller, easily manageable and less risky orders which works as an effective camouflage for large positions being exited or entered by large trading firms. This system of camouflaging makes it easier to manage trading and is fast becoming the industry norm.
In time past, large orders were executed as often as possible as single orders to save time, however, quantitative trading has effaced the need for this approach. This is because of the increased capacity of trading algorithms to make decisions with exact similitude to decisions made by an expert market trader with several years of experience.
Quantitative Trading Strategies Conclusion
Quant trading has unearthed new trading opportunities, with financial outlets cutting into the chase by offering different quant trading platforms. The ability of quant trading to permit execution of several orders at a time, leads to the possibility of utilizing several trading opportunities at any point in time. This potential has been and continues to be exploited by very sophisticated quantitative trading strategies, for increased profitability.
These quantitative trading strategies that help firms create additional revenue streams and increase their involvement in the market. Thus, obvious gains of quantitative trading strategies for firms include improved efficiency and overall returns.