Author: Shams ul Zoha
Quantitative trading refers to the use of algorithms, mathematical approaches, and numbers to find market opportunities. Quants are those market participants who use this type of technique. They are programmers or traders who may specialize in using the fintech industry for coding programs according to the desired strategies. As robots carry out the executions, scalpers or fast traders prefer this type of high-frequency trading. The form of investment was previously limited to institutions and hedge funds; however, with technology and IT development, regular traders can also take advantage of it.
Steps to follow for trading quantitatively
Becoming a quant is complicated, yet straightforward. As mentioned before, it requires experience in both the finance and software sectors to produce an algorithm that shows consistency. Let us cover the essentials proficiently.
In-depth knowledge of mathematics
In the quant world, having an in-depth knowledge of mathematics to crunch complex algorithms, implement strategies, and backtesting is necessary. Trading is all about numbers to some extent, and having a single minor error in terms of counting will render your bot useless. Your performance output may scream disaster.
A financial degree such as an MBA can certainly help give prospective quant traders a jump start in their career. Getting side diplomas within quant trading, as you do your masters improves your portfolio.
C++ and Java are famous programming languages in the software sector that the industry-standard MT4® and 5® use for developing MQL. Matlab, spreadsheet, and GitHub familiarity are a plus.
Last but not least, you must have an in-depth knowledge of using a PC. The operating system must be powerful enough to handle all the complicated processes.
Trading currencies is all about having the right amount of knowledge. Properly implementing that wisdom will help you become the best quant trader. It is expected that quantitative investors have good information about trading strategies and the associated advantages and disadvantages. A quant trader must show they are comfortable using online data feeds and chartings to develop the best algorithm. Advanced quant traders can code EAs that work based on neural networks. This automated software learns as they trade to avoid any future mistakes, much like a human.
Advantages and disadvantages of quant trading
Quantitative trading has the following advantages for traders:
Mathematical model. Having an algorithm to trade on a trader's behalf removes all the human limitations. A man can't capitalize arbitrages amongst brokers and perform thousands of executions within a single second.
Laziness. An EA can work 24/7, 365 days a year, without breaking sweat. All the decisions are made without any fatigue or laziness.
Emotions. Having poor trading psychology is one of the most significant factors driving traders into losses. There are so many emotions that one must overcome as a trader, which can take a lot of time and effort. As computers and mathematics are devoid of any such phenomena, they can trade consistently without any detrimental feelings.
Backtesting. By testing out your system with historical data, you get to know what kind of future performance it could have. Various settings are available within the backtester, allowing a trader to make his quantitative model perform under different market conditions.
Strategies. The scope of game plans that you can incorporate within the algorithm is infinite. Test out different strategies that involve the use of fundamentals, price action, indicators, etc.
Passive income. An algorithm that provides a static 10% monthly return with a low 5% drawdown will set you up with a good passive income for life.
While the disadvantages are as follows:
Out of approach. Even after all the developments made, retail traders still cannot get their hands on the best trading robots. Only the top institutions, banks, and hedge funds can make use of these models.
Error. It takes only one single mistake in a number to render your quant forex trading useless. A trader may have to spend hours searching for a way to fix his algorithm or hire expensive programmers to do the work.
Should I opt for quantitative trading?
For beginners and amateur traders who are just stepping into the financial markets, it is advisable for you to increase your overall trading experience. Once you have enough knowledge, you can then learn how to code different algorithms accordingly and input your strategy into a robot. Make sure you double-check your system with a professional developer before using real money.
About Forex Copier
Forex Copier is an automated software that helps you copy your trades on the same or different PCs. It has two versions:
Forex Copier remote 2 for copying trades remotely from one MetaTrader® platform to another.
Forex Copier 3 copies trade between MetaTrader® platforms on similar PCs.
The copy trading software has many valuable features, including lot/risk management, price adjustments, order filtering, tweaking SL/TP, and emergency stops to help you get an easy edge in the industry. It is possible to diversify your trading accounts and brokers by distributing your equity over several portfolios and using the auto trade copier to copy positions from one account to all of the others. You can also choose to sell subscriptions to your signals and EAs to investors worldwide, with or without access to their login credentials.
The scope here is unlimited, as the Forex Copier can help gurus in teaching by sharing their executions. For traders on a losing streak, the mirror trading software offers a reverse mode that turns all incoming buys into sales and vice versa with modifications of the exit and entry points.