Quantitative Trading


DEFINITION of 'Quantitative Trading'

Trading strategies based on quantitative analysis which rely on mathematical computations and number crunching to identify trading opportunities. Price and volume are two of the more common data inputs used in quantitative analysis as the main inputs to mathematical models. As quantitative trading is generally used by financial institutions and hedge funds, the transactions are usually large in size and may involve the purchase and sale of hundreds of thousands of shares and other securities. However, quantitative trading is also commonly used by individual investors.

BREAKING DOWN 'Quantitative Trading'

Quantitative trading techniques include high-frequency trading, algorithmic trading and statistical arbitrage. These techniques are believed to contribute to increased market volatility because of the rapid-fire nature of their trading and extremely short investment horizon. Many individual investors are more familiar with quantitative tools such as moving averages and oscillators.

  1. Manual Trading

    A trading system that involves human decision-making for entering ...
  2. High-Frequency Trading - HFT

    A program trading platform that uses powerful computers to transact ...
  3. Statistical Arbitrage

    A profit situation arising from pricing inefficiencies between ...
  4. Algorithmic Trading

    A trading system that utilizes very advanced mathematical models ...
  5. Quant Fund

    An investment fund that selects securities based on quantitative ...
  6. Quantitative Analysis

    A business or financial analysis technique that seeks to understand ...
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  1. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  2. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  3. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  4. Can hedge fund returns be replicated?

    You can replicate hedge fund returns to a degree but not perfectly. Most replication strategies underperform hedge funds ... Read Full Answer >>
  5. Can foreign investors invest in US hedge funds?

    U.S. hedge funds are open to accredited investors. When they distribute profits to investors, those proceeds are taxed at ... Read Full Answer >>
  6. Do hedge funds manipulate stock prices?

    Some economics professors think there is evidence of manipulation of certain stocks by hedge funds on key reporting days. ... Read Full Answer >>

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