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.

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RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
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  3. Can hedge funds trade penny stocks?

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  4. Are hedge funds regulated by FINRA?

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  5. Should mutual funds be subject to more regulation?

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