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Quantitative Trading

What is 'Quantitative Trading'

Quantitative trading consists of trading strategies based on quantitative analysis, which rely on mathematical computations and number crunching to identify trading opportunities. As quantitative trading is generally used by financial institutions and hedge funds, the transactions are usually large in size and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is becoming more commonly used by individual investors.

Explaining 'Quantitative Trading'

Price and volume are two of the more common data inputs used in quantitative analysis as the main inputs to mathematical models.

Understanding Quantitative Trading

Quantitative traders take advantage of modern technology, mathematics and the availability of comprehensive databases for making rational trading decisions.

Advantages and Disadvantages of Quantitative Trading

The objective of trading is to calculate the optimal probability of executing a profitable trade. A typical trader can effectively monitor, analyze and make trading decisions on a limited number of securities before the amount of incoming data overwhelms the decision-making process. The use of quantitative trading techniques illuminates this limit by using computers to automate the monitoring, analyzing, and trading decisions.


Further Reading


Media-aware quantitative trading based on public Web information
www.sciencedirect.com [PDF]
… Acknowledgements Thank you to all of the people involved in writing and producing Trading Economics … understanding the data that drives the financial markets will support traders and practitioners in … Among the most traded, well understood and liquid of assets,of course, are …

From dissonance to resonance: Cognitive interdependence in quantitative financeFrom dissonance to resonance: Cognitive interdependence in quantitative finance
www.tandfonline.com [PDF]
… Acknowledgements Thank you to all of the people involved in writing and producing Trading Economics … understanding the data that drives the financial markets will support traders and practitioners in … Among the most traded, well understood and liquid of assets,of course, are …

A quantitative stock prediction system based on financial newsA quantitative stock prediction system based on financial news
www.sciencedirect.com [PDF]
… Acknowledgements Thank you to all of the people involved in writing and producing Trading Economics … understanding the data that drives the financial markets will support traders and practitioners in … Among the most traded, well understood and liquid of assets,of course, are …



Q&A About Quantitative Trading


What is quantitative trading?

Quantitative trading consists of trading strategies based on quantitative analysis, which rely on mathematical computations and number crunching to identify trading opportunities.

What does quantitative trading mean?

Quantitative trading is the use of mathematical and statistical methods in finance and investment management.

Who are quantitative analysts?

Quants tend to specialize in specific areas which may include derivative structuring or pricing, risk management, algorithmic trading and investment management. The occupation is similar to those in industrial mathematics in other industries.

How are transactions made by quantitative traders usually large in size?

Transactions are often made by quant traders involving the purchase and sale of hundreds of thousands of shares and other securities.

Are there different types of quant traders?

Yes, there are different types.

Who typically uses quantitative trading?

Financial institutions and hedge funds use quantitative trading.

What do quants usually search for?

They usually search for patterns such as correlations among liquid assets or price-movement patterns (trend following or mean reversion). The resulting strategies may involve high-frequency trading.

Are individual investors using quant techniques to trade more common now than before?

Yes, individual investors are using quant techniques to trade more commonly now than before.