Best Quantitative Trading Strategies

1. BestQuantitativeTradingStrategies Whatisquantitativetrading? Quantitative trading is the love child of Trading techniques, and the brilliant science computers have created for us. It is the math where the trends are calculated on the basis of how the markets havebeenbehavinginthepast with similarconditions. Whatthe quantitativetraders doismakea modelofthe previous behaviorofthe marketandthen backtest in similar conditions. Supposethemodelpredictsasimilarpatternorasimilaroutcomeinmostofthosehypothetical situations. In that case, the same results are made the foundation stones of the speculations, which thendrivethe bets madein the market. Quantitativeanalysisisabranchofcomputersciencethatdealswithalotofdataandcrunching it to find a pattern. Everything that we see around us. Every invention that has ever walked the face oftheearth isbecause ofthis abilityofthehuman brain—pattern-recognition.

2. We see a bacteria or a virus acting a specific way; we make a pattern out of it, and then we create a vaccine. Mentally, we have patterns too. The people who are going through a lot of stress. they develop a certainpatternintheir day-to-daylives justto suppress thatstress. Thedoctorstryandrecognisethis patternandletthepatientsknowsothattheycangetoutofthat loop.Evenupinthesky,welookatthestarsandalloftheheavenlybodiesandmakeapatternout ofthoseto understand thingsalittle better. Quantitative trading is the exact same thing. All it revolves around is pattern recognition. The traders don’t have to do that independently, but they deploy mathematical models to process historical data. The model is deployed in the real world once the backtesting has efficiently surpassedthe harshestconstraints. Letusreadmoreaboutquantitativetrading: Quantitativetradingusuallydealswithlargevolumesofdata,likethedataofahedgefund(the dataintheexampleofahedge fundwouldbe money). Sincethereissomuchdatainvolved,everyquanttraderneedstohavesomebasicknowledgeof its terminologies. Let us look at somethighsthat can makeeveryquanta better trader: Understand thelanguages: The programming languages like Python and React have their own single-handed impact on finance and quant trading. Python lets you create models in an IDE( integrated development environment). WhereasReacthasmorethanapplicableapplicationsinthefinanceindustry.Havinganupper hand in any of these two languages can let you become a better quant and will put you ahead of the crowd that is justtryingto owntheclaimsthat theyare a quanttrader. Becomfortablearoundmath thatsoundsalien: The math like stochastic calculation, optimisation techniques, and Fourier transforms along a couple of more hard names is what you will mostly see while you begin quantitative trading. This is not just math but, Engineeringmath, Thekind ofmath that everyquant trader should varyof.

3. As a quant trader, if you are looking for a job, then you will mostly be hired by banks given the fact that you have a doctorate degree in a specific and applicable science that the industry needs. This is because of the fact that the banks and big hedge funds need people who can teach themselvesnew math veryeasily. Understandtradingandtradingstrategies: Being a math-head alone will not cut it. No matter how good of a programmer you are, how good of a mathematician you are, understanding the basics of trading and trading strategies is as important in quantitative trading as it is for any other form of trading; being able to work the strategiesquicklycanmakeyoumoveupinthetraderlot.Integrationofmath,Programming andtradingstrategiesiswhatmakes the best quanttraders. Whyisthereaneedforquantitativetrading? Quantitative trading is something that basically keeps manual trading at bay for a number of reasons. When there is a fresh event in the market, the traders will study it and plan their trades accordingly.Whatifamethodwoulddothesamefor youandeventakepositionsonyourbehalf? What ifthosepositions wereprecise to thelevel ofa CPUcalculatedapproach? ThatistheexactreasonwhyQuanttradingisneeded.Quantitativetradingisneededtomakequick decisionswhenever themarketissubjected to somesort of event ornews. Quantitativetradingandthebestquantitativetradingstrategiesworkperfectlyforpeoplewhowant totimethe marketbeforethemajorityoftraders aroundthe globecan do that. Can Ipersonallyruna quantitative tradingstrategy? IfyouarethinkingofbuildinganHFT(high-frequencytrading)strategyforyourself,youwillface goliathconstraintsunderthe names of equipmentandinfracostings.

4. Withallthosethingsbeingsaid,letushavealookatthe bestquantitativetradingstrategies: AlternativeDataStrategy: Quantitative trading is more than just reading the market. It is more about reading the consumer data. Different data poses different pictures. For example, if the people are buying more apple products then there can be a possibility of the firm seeing a better stock potential for that quarter. This is called an alternative data strategy: When the traders look at different data than the market data. Market data is more like how the firm has done in the past few years and how it will do in thenext quarter orwhatever the time window tostudyit istaken under consideration. There are different data types that are analyzed in the alternate data trading strategy. Theseinclude 1. 2. 3. Weather data Consumerdata Locationdata. There are different data types than these as well but these are the ones that are required to fulfill a good alternate datatradingstrategy. Thedataisimportant,andhence,it playshard toget. Thehedge fund providershave tobe part of anonlineauctiontoholdanytypeofdata.Whentheybuythedata,thisgivestheinstitutionsastep aheadacceleratorthanamajorityoftradersbecausewhenitcomestodata,youneedtobecreative with the sources and keep changing them since you are looking at making trading decisions that themasseshave notyetcompleted, but willforsuremakein thecomingdaysor weeks. Playinginsmallermarkets: There are markets that have fewer people that trade on them and since that is the case, the competitionislower andthe opportunityto makemoneyis exponentiallyhigh. Quants can build the best quantitative trading strategy in these markets because of the fact that therearealotless peoplelookingfor entryand exitpositions. Sincethenumberofpeopleisless,therearemanymoreopportunitiesforthesystemtocalculate a better entry and exit position for the quant. If this strategy is integrated with the alternative data trading strategy then good resultscan be seen.

5. Forexample,ifthere’sanewcryptocurrencyinthemarketthenthetraderscandeploytheirtrading models around that crypto and earn as much as they want. All that depends on how dedicated the trader is and how correctly has he or she programmed the model and how well is the execution in thecorrectmarket. Tradeat ahighfrequency: ThisisalsocalledHFTorhigh-frequencytrading.Tobeahigh-frequencytrader,thepersonneeds to be involved with a good trading firm. There are certain strategies that lie within the High- frequencytradingstrategy: Letushavealook atthose: