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Quantitative Trading (Quantitative Investing)

Moneyzine Editor
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Moneyzine Editor
1 mins
September 21st, 2023
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Definition

The term quantitative trading refers to the practice of using sophisticated mathematical models to identify opportunities to buy and sell securities. While quantitative trading is oftentimes associated with large financial institutions, the approach is also used by individual investors.

Explanation

Also known as quantitative investing, quantitative trading involves the use of high-speed computers and advanced analytical algorithms to look for patterns in trading data. Used by large institutional investors, hedge funds, as well as investment banks, quantitative trading models allow money managers to analyze large volumes of information and apply sophisticated business rules to automatically buy or sell securities.

The speed at which these computers can analyze data provides these organizations with a trading advantage in the marketplace. Quantitative trading relies on complex mathematical models, which closely examine both the prices of securities as well as current trading volumes to identify investment opportunities. Models are oftentimes developed by individuals with backgrounds in mathematics, physics, and statistics. In addition to algorithmic trading, quantitative investing is also associated with high-frequency trading and statistical arbitrage.

Related Terms

high frequency trading, Super Display Book, mixed lot orders, SuperDOT, Automated Order System, statistical arbitrage, market arbitrage, flash trading

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