What is quantitative trading?

Quantitative trading is a technical investment strategy on financial markets that rely on mathematical formulas and calculations to recognize opportunities. Quantitative trading, which employs many advanced hedge funds and some mutual funds, omits most of the human element from investment decisions. It is an alternative to qualitative trading, an investment technique based on insight and analysis of financial experts. Trends are revealed on the basis of the price of security and volume or frequency at which it is traded. Securities such as stocks tend to trade cycles up and down. The quantitative method seeks to earn on these trends.

For example, by separating trend formulas, for example, when shares show trend versus, if it does not seem to be trading on the basis of any trend behavior, the patterns are detected by tock. When the price begins to show signs of entry into the trend period based on historical patternThere may be an investment opportunity ahead of us. The investment advisor could decide to enter this business position in time to benefit from this trend.

There are several distinguishing functions that separate quantitative trading from qualitative strategy. The aim of the quantitative strategy is to reveal investment opportunities in undervalued securities, including shares and bonds, except for identifying assets that are overpriced. These factors would lead an investment advisor to take decisions on purchasing and selling on financial markets.

Quantitative investment techniques are also designed to assess and manage various risk exposures in the portfolio. Sometimes there is subtle behavior in financial security that the human eye can overlook. By relying on a pad -in -investment advisor, it can be better able to identify imbalances or vulnerability in a portfolio that couldlead to potential losses if it remains unadhessed.

There are cost benefits associated with quantitative trading. Investment advisors often diversify more securities in different regions. The quantitative style of trading is designed to reduce the cost of purchasing and selling many securities in different transactions will streamline these stores.

Although quantitative investment is driven mainly by computer software, a human element is required. Financial analysts must still conduct scientific research on investment techniques on which quality investment is based. However, the quantitative investment manager usually relies on human recommendations and evaluation of investment securities and more on computer formulas.