Quantitative Analysis involves using mathematical and statistical models, to track the changes in the price and volume of any stock. Quantitative trading is trades based on such analytical models. It is an analysis made by investors to find suitable investment opportunities. Earlier, this method was primarily used by financial institutions like investment management firms, hedge funds, and institutional investors, while trading on huge volumes of securities. However, in recent times, individual investors have been using quantitative trading methods to analyse their own portfolios. Using these models an investor speculates on the future prices of a security. Similar models are used for quantitative forex trading as well. In this method, the rise or decline in a foreign currency is speculated.
Quantitative trading is employed to identify a profitable trade. The advantages of using computer algorithms are as follows:
Successful implementation of a quantitative trading strategy is not an easy task. Because of the dynamic nature of the stock market, things go unnoticed. A few disadvantages of quantitative trading are:
There are four quantitative trading strategies:
For example, an investor uses quantitative trading to decide the stocks he wants to invest in. The algorithmic or quantitative trading system scans multiple variables such as volume, gains, momentum, and more. The stock with the highest-rated variables is chosen by the investor.
Financial markets are dynamic, as they have multiple components involved. Quantitative analysis in trading gives investors an insight into the opportunities available in the market and the ways to make use of them. Quantitative forex trading is also used with the objective to make short-term speculations. However one needs to be careful of the pitfalls of using quantitative trading tools as well. Due to the high volatility of the stock market, successful trading is not always possible.
Share this article:
Level up your stock market experience: Download the Bajaj Broking App for effortless investing and trading