If you’re thinking about getting into quant trading (or quantitative) there are some things you should know about it first. Quant trading itself is actually a mixture of three different disciplines: trading, statistics, and programming. Now don’t go and get all overwhelmed you don’t have to be an expert in all three fields to be successful. I’m no expert and not anyone is really an expert at all three. You just have to have knowledge of each. Keep reading to see what I mean.
It’s true; you want to avoid trading the old fashioned way with fundamental and technical analysis when quant trading. However, this is still a necessary evil. With quant trading, you are essentially telling a computer to trade for you, and if you want to know what to tell the computer to do, you need to know how to trade the old fashioned way. You don’t have to be an expert by any means, but you need to know it and understand it. If you are a longer term trader and the thought of learning charts and patterns scare you then learn the fundamental analysis side of things. And if the thought of fundamental analysis bores you or you want to take part in the faster style of trading, then learn technical analysis.
Understanding how to trade and how the market works is absolutely vital to any type of success that you will have as a quant trader. I’d focus more energy on this rather than any other discipline that I talk about.
This I know is an uneasy subject for most, but this is the most efficient way to determine patterns and convey any type of logic to a machine. Statistics bridge the gap between your trading strategy and telling the machine what to do. With converting your strategy into a statistical measurement you then can allow the machine to enact on trades and “think” for you. After all, that’s the whole point of doing this, so the machine can trade and scan the markets for you because it can do it efficiently and unbiased. Well unbiased as long as you don’t code the bias into the strategy. With statistics, you remove the emotional factor which seems to plague all traders. Anyone can come up with a trading plan but only a few can stick with it once they are actively in a trade, by implementing your plan to a machine that will make decisions based on statistics, you remove the human element from the trade, therefore removing the emotions. By removing emotions your results will be based on actual stats vs a feeling. Markets do not operate on feelings.
Programming For Quant Trading
Programming is the part where you actually tell the machine your strategy and what statistical logic you want it to use. It’s the same as going to a country where you don’t know the language, first you have to learn the language so you know how to communicate. It’s the same with programming, you need to learn the language to communicate with the machine. And by machine, I mean server, because this is where all of your logic will be executed.
Don’t let the terminology trip you up here. It’s not as complicated as it sounds and can all be learned in time. You don’t have to be an expert programmer to program trading algorithms. Thanks to things like Quantopian it’s even easier to get started with the programming aspect of quant trading. A good place to start learning that I recommend is datacamp.com if you don’t mind paying a subscription and the free option would be pythonprogramming.net.
Summary of Quant Trading
There are a lot of moving parts to quant trading, no questioning that. Don’t let the complexity of it deter you from learning though. Nothing happens overnight, and learning something like this will take time. But the biggest thing you need to learn is how trading works. To have a machine do it for you, you first have to understand what the machine is going to do. Plus you can be actively trading the “old fashioned” way while you are learning how to program. If you want to learn about how to trade and become active in the markets, be sure to sign up for my email list, where I can keep you up on different strategies and methods to approach the market.
I am also creating a trading course for beginners, and if this interests you be sure to sign up to keep up with its progress to get the ability to buy the course first at a discount rate. Everyone struggles with learning how to do this, don’t get discouraged. Comment below with the biggest struggle you are encountering now.