What is quantitative trading and what is its future prospect? Tell me what you know.

Quantitative trading refers to the way of securities investment with the help of modern statistics, mathematics and computer technology. In foreign futures market, programming has gradually become the mainstream, but in China, it has just started. Today we will analyze its advantages and disadvantages.

What is the charm of quantitative trading?

The so-called quantitative trading refers to the use of advanced mathematical models instead of artificial subjective judgments, and the use of computer technology to select various "high probability" events that can bring excess returns from huge historical data to formulate strategies, reduce the impact of investors' emotional fluctuations, and avoid making irrational investment decisions when the market is extremely enthusiastic or pessimistic.

Quantitative model = computer technology+quantitative analyst's strategy

In the stock market, quantitative trading was not news for a long time. Andy, a quantitative practitioner, told People Venture Capital (ID: RENMINCT) that 70% of foreign transactions are completed by computers, while this figure is close to 50% in China.

In the past, the stock market was manually operated by traders, and it was inevitable that a mistake would become a lifelong regret. This behavior is nicknamed "Fat Finger". In contrast, quantitative trading is like a "fairy finger" that turns stone into gold. The most beautiful fairy tale is "drought and flood to ensure harvest" Whether it is a bull market or a bear market, you can make a lot of money.

The most dazzling star in traditional stock market quantification is james simons. From the establishment of 1988 to the retirement of Simmons in 2009, the average annual return rate reached an astonishing 46%. Even when the subprime mortgage crisis swept the United States in 2007 and the quantitative fund suffered from waterloo, the medal fund still achieved an impressive 73% return.

The commonly used strategies in quantitative investment include alpha strategy, CTA strategy and arbitrage strategy. Alpha strategy excavates investment opportunities beyond the overall performance of the market through stock selection portfolio; CTA strategy follows suit, chasing up and down; Arbitrage strategy takes advantage of the market price difference, and it is empty-handed. Every quantitative investment strategy is a black box, which is a secret that other outsiders can't know about the core competitiveness of quantitative investment of a quantitative company.

This kind of "black technology" makes investors in the currency circle particularly jealous. The founder of a quantitative trading company described his experience of switching to quantitative trading in digital currency as follows: "Two years ago, my friends who speculate in coins often watched the market 24 hours a day, which made me exhausted and asked me how to realize the quantitative programmed trading in digital currency. They provided a relatively simple primary model and wanted me to expand and transform it and add a risk management module. "

At present, the quantitative trading teams in digital currency, large and small, adopt quantitative strategies similar to those used for arbitrage in the traditional foreign exchange market and futures market, but they also play new tricks, and moving bricks is a typical example. The scientific name of moving bricks is "matchmaking transaction", which refers to an arbitrage way to replace the same type of stocks or the same stocks in different places according to the value analysis and the relative proportion of stock prices. Due to policy reasons, it is not common for the same stock to move bricks in different places, but in the digital currency market, there are numerous large and small exchanges, and the prices of different exchanges are often different. Using the price difference to buy low and sell high is the simplest and rudest way to make a profit.

Advantages of quantitative trading

1. Strict discipline

Quantitative trading has strict discipline, which can overcome human weaknesses, such as greed, fear, luck and cognitive bias. A good investment method should be a "transparent box". Every decision we make is well-founded, especially supported by data. If someone asks me why you bought a stock, I will open the quantitative trading system, which will show the comprehensive evaluation of the selected stock relative to other stocks in terms of growth, valuation, capital, trading opportunities, etc., and this evaluation is very comprehensive, which is more convincing than ordinary investors patting their heads or simply looking at the trading of an index.

2. Completely systematic

A complete system is embodied in the "three more". First of all, we have a multi-level model, including asset allocation, industry selection and selected stocks. Second, it is multi-angle. The core investment ideas of quantitative trading include macro cycle, market structure, valuation, growth, profit quality, analyst profit forecast, market sentiment and so on. Then there is multi-data, that is, the processing of massive data. The ability of the human brain to process information is limited. When there are only 65,438+000 stocks in a capital market, it is beneficial for qualitative investment fund managers, who can deeply analyze these 65,438+000 companies. In a large capital market, such as when there are thousands of stocks, the powerful information processing ability of quantitative trading can better reflect its advantages, capture more investment opportunities and expand greater investment opportunities.

3. Apply the idea of arbitrage appropriately.

Quantitative trading is to find valuation depressions and capture opportunities brought by mispricing and mispricing through comprehensive and systematic scanning. Qualitative investment spends most of its time wondering which company is great and which stock can double; Different from qualitative investment, most of the energy of quantitative trading is spent on analyzing where the valuation is low, which variety is undervalued, buying is undervalued and selling is overvalued.

4. Win by probability

This is manifested in two aspects. First, quantitative investment constantly excavates historical laws that are expected to repeat in the future and uses them. Secondly, in the actual operation of stocks, probability analysis is used to improve the probability of successful trading and position control.

Quantify the risk of trading.

First, the risk of "grade difference" in the primary and secondary markets, followed by the risk of traders' operation, and finally the risk of system software.

The "grade difference" in the primary and secondary markets is the core of the whole arbitrage transaction. Under the existing rules, there are two kinds of ETF arbitrage modes: one is to buy a package of tickets, exchange the corresponding ETF shares in the primary market according to the exchange ratio, and then sell ETFs in the secondary market; The other, on the contrary, is to buy ETF shares in the secondary market, exchange them for corresponding shares through the share exchange ratio, and then sell them in the secondary market. The trading order depends on the changes of stock price, turnover rate and ETF share trading price.

Because of the change of stock price, ETF arbitrage spread is fleeting, so the complicated calculation process is currently completed by computers in the industry. Traders can set up a calculation program to decide the strategy according to the results, or they can let the system trade automatically when arbitrage space appears. The latter is called programmatic trading.

Because the arbitrage space is very small, usually only a few ten thousandths, and the amount of funds involved in arbitrage trading is relatively large, in order to obtain moderate returns. If traders do it in the wrong order, the investment will lose money, which is differential risk. In order to control such artificial risks, brokers generally advocate automatic trading, the direction is controlled by computers, and traders can input the number of transactions.

The second risk is the operator's error, such as the Oolong Finger Incident of Everbright, which may be that the trader made a mistake when inputting the quantity. This also involves the third risk, system software risk, and each trader has corresponding trading rights in the system, including quantity and amount. The amount involved in Everbright was once rumored to be 7 billion yuan. How did such a huge amount bypass the system authority to complete the transaction? The exposure of this issue has also made the industry question that Everbright's risk control has not been done enough.

This platform is like a microcosm of the currency circle. Everyone is afraid to kneel on the official's knees, listening to the sound of the dice hitting, but they don't know that the official is the number one player among them. "Professional investors know that there are bookmakers," Andy said bluntly. Most quantitative platforms may introduce more complex stop-loss strategies and better arbitrage mechanisms, but unless the platform has enough capital to become a game producer, it will only gain something.

Quantification may be understandable as a tool, but many digital currency funds are on the edge of the law in the name of "quantification". Zhao Xijun, a professor at China Renmin University, believes that the financial industry is different from other industries, and it uses other people's money to participate in financial activities. When risks occur, others will lose, so the government needs stricter supervision.

Quantitative trading heart for heaven, dream for hell. Bian Xiao here hopes that investors will not wander on the edge of the law and do their best, or you will be punished by law.