Quantitative Investing Systems for Retail: Does it Work?

Do quantitative investing systems for retail work? We’ll look into this and other concepts in detail.

Quantitative investing is a 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 physics, math, computer science, or statistics. However, the summarized results of quantitative analyses can be readily accessible to all who want to be quantitative investors when presented in an intuitive framework.

Quantitative Investing Systems for Retail

There is 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, which specializes in bringing the power and technology of automated quantitative investing systems for retails used by banks and hedge funds to the retail investor.

Successful investing comes with the discipline associated with automating a proven investment strategy. Still, 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 for retail that will perform beyond the current trend, volatility level, or economic environment before crashing? Is algorithmic trading for retail investors available?

Advantages of Quantitative Investing Systems for Retail Investors

1-Objectivity in investment decisions

Quantitative investing systems for retail eliminate human biases that can affect investment decisions. The approach is data-driven, and the system relies on algorithms to analyze market data and make investment decisions. This objectivity in decision-making helps to minimize the influence of emotions and biases.

2-Data-driven investment strategies

Quantitative investing systems for retail use historical and real-time data to analyze market trends and identify investment opportunities. This data-driven approach enables the system to make investment decisions based on facts and not speculation.

3-Minimizing emotional biases

Human emotions such as fear, greed, and overconfidence can significantly impact investment decisions. These emotions often lead to irrational investment decisions. Quantitative investing systems for retail remove these emotions from investment decisions, making the approach more rational and less prone to errors caused by emotional biases.

Disadvantages of Quantitative Investing Systems for Retail

1-Need for technical expertise

Quantitative investing systems for retail require technical expertise in programming and statistical analysis. Retail investors who lack the necessary technical skills may find it challenging to create and implement a quantitative investing system.

2-Limited flexibility

Quantitative investing systems are designed to follow specific rules and algorithms. These rules can be rigid, making it challenging to adjust to changing market conditions. As a result, the system may miss out on opportunities that are not accounted for in its algorithm.

3-Inability to account for unforeseeable events

Quantitative investing systems for retails are based on historical and real-time data. These systems may not be able to account for unforeseeable events such as pandemics, natural disasters, or geopolitical crises, which can significantly impact the stock market.

Quantitative Investing Systems for Retail: Risk/Money Management

Taking things one step further, I feel retail traders should be very cautious when building their own quant systems because of their ability to manage risk.

Retail traders have much smaller position sizes making them small and nimble for moving their money around without affecting the overall marketplace. 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 success, whether you are 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.

Factors to Consider in Selecting a Quantitative Investing System for Retails

1-Data sources

Retail investors should consider the quality and reliability of the data sources used by the quantitative investing system. The system’s data sources should be accurate and up-to-date to ensure the effectiveness of the investment strategy.

2-Technical expertise required

Retail investors should consider the technical expertise required to implement the quantitative investing system. Investors should ensure that they have the necessary technical skills to create and maintain the system or seek professional help in developing and managing the system. Investors should take quantitative investing course. Quantitative investment strategies pdf is also available to guide you.

3-Historical performance

Retail investors should also consider the historical performance of the quantitative investing system. Investors should review the system’s performance over an extended period to determine its consistency and effectiveness in different market conditions.


The cost of implementing a quantitative investing systems for retails should also be considered. Investors should weigh the cost of creating and maintaining the system against the potential benefits of using the system.

Quantitative Investment Strategy Examples

Quantitative investment strategies are based on statistical analysis and mathematical models to identify profitable investment opportunities. Here are a few examples of quantitative investing systems for retail:

  1. Momentum Trading: This strategy involves buying stocks that have shown strong positive price movements and selling those with weak price movements.
  2. Value Investing: This strategy involves identifying undervalued stocks based on fundamental metrics such as P/E ratio, price to book ratio, etc. and investing in them with the expectation of their prices rising in the future.
  3. Statistical Arbitrage: This quantitative investing systems for retail involves identifying market inefficiencies and exploiting them to generate profits. It involves identifying mispricing in stocks, bonds, or other securities based on statistical analysis and trading them.
  4. Risk Parity: This quantitative investing systems for retail involves allocating investments based on risk rather than asset class. It aims to diversify the portfolio and reduce overall risk by investing in assets with different risk profiles.
  5. Trend Following: This strategy involves identifying trends in the market and investing in securities that follow the trend. It aims to capture the gains from price movements in securities.

These are just a few examples of quantitative investing systems for retail strategies. There are many more such strategies, and each strategy has its own unique approach to identifying profitable investment opportunities.

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 an 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, using most indicators and combinations, and many of my own unique indicators. I am very technical by 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 doesn’t and the issues that 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 believe 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 and quantitative investing strategies.

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

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Tags: Quant Investing, Quantitative Investing, Quantitative Trading