Speed and accuracy play a deciding role in the results generated through trading. The markets are fast-paced, and there is only so much one can achieve with trading manually. It is, for this reason, algorithmic and quantitative tradings have been taking over in recent times.
Quantitative trading is based on pre-written codes and algorithms that execute a set of instructions with accuracy and speed that is difficult for any human to match. There are various indicators that are quantitatively analyzed in real-time with algorithmic trading to ensure traders get the desired outcome.
The potential of quantitative trading is unlimited, and it continues to evolve to expand its capabilities while simplifying trading for the traders. Here are the few advantages of algo or quantitative trading to help you get a better grasp of why it has become so popular in recent times.
No Emotional Influence
Getting carried away and placing a loss-making trade is something most traders would relate to. Quantitative trading uses a set of algorithms that are coded to provide a specific outcome, and the process is automated. It leaves no room for human error or emotions. Trading based on the quantitative model keeps the emotions in check and prevents overtrading, which is a commonly seen trait among the active traders.
Back-testing Abilities
One of the essential steps that contribute to building a successful quantitative trading model is back-testing. It uses historical market and trading data to determine how the new quantitative trading model would’ve performed in the market. Its performance analysis helps in identifying how the quantitative trading model would fare in the current markets. It may not give 100 percent clarity but helps in priming the algorithms for maximum profitability. It lowers the risks and provides the trader with an idea of what to expect from the quantitative trading model.
Discipline
If there is one quality that can be attributed to the frequent and massive losses suffered by traders is the lack of discipline. Indiscipline can be caused by fear of loss or the temptation to increase profits. Quantitative trading help traders stick to the plan even in volatile markets due to automation. It also helps in minimizing the pilot-error to a great extent, and there won’t be an order placed for 1,000 shares when the intent was to place a trade for 100 shares. Eliminating human errors from trade executions is one of the reasons why algo and quantitative trading came into existence.
Catching on Trends
Quantitative trading helps the traders to exploit the market trends in real-time. The quantitative trading models are designed to pick-up and identify trading patterns and trends in the market as it occurs. It can analyze large groups and different categories of assets in real-time and provide the traders with market scenarios through a grading system. The grading system helps the traders in making informed call decisions based on trends and the analysis offered by the quantitative trading model. It can be either long positions or short positions depending upon the grade levels rated by the quantitative system.
Improved Trading Speed
One of the primary benefits of automated quantitative trading is the speed at which the trades are placed. As soon as the system detects that trading criteria are met, it places the order. Such speed cannot be achieved when placing trades manually. In fast-paced markets, differences of a few seconds can impact the outcome profoundly. Placing trades is automatically backed by other instructions, including profit targets and stop losses. The instructions are carried out instantly without delay, which, when done manually, can increase the losses, especially during volatile markets. The automated trading system based on the quantitative trading model helps in overcoming this obstacle.
Achieve Diversification in Trading
Having diverse trading strategies in place to spread the risks through multiple accounts is possible through the quantitative trading model. To do it manually can be time-consuming, tedious, inaccurate, and highly risky. The quantitative trading strategy provides the traders’ ability to diversify their trades through various trading instruments and create a hedge for loss-making positions at the same time. It helps traders achieve stability in their trading positions.
Quantitative trading also helps in handling more extensive portfolios at a much-reduced cost in comparison to managing trades manually. Quantitative trading strategies can be changed with the evolving markets to minimize risk and maximize profitability. The benefits of quantitative trading strategies are well-documented, and it undoubtedly is the future of trading.
Triforce Trader is one of the leading names in the world of quantitative and algorithmic trading. Founded by Matthew Owens, Triforce Trader offers a range of exclusive training that would help the traders, beginners as well as professionals, to get a transformative understanding of how quantitative trading can work to their advantage.
The educational courses and services offered at Triforce aim at helping retail traders to understand the intricacies of trading markets through practical and theoretical training modules along with tests on each stage to track the progress. The courses are designed to help the students with practically no experience in trading markets to become a pro by the completion of the course. The services offered at Triforce also include Tri-Alerts, which can benefit the retail traders to get an insight into the latest market trends and place profit-making trades.
The quant-based trading courses at Triforce are designed to cater to the needs and requirements of traders at various levels based on their objectives. It equips the to-be as well as experienced traders with the knowledge, tools, and information, necessary to take their trading game to the next level through result-oriented quantitative trading strategies.