Quant Trading is a fast growing trading methodology that an increasing number of “retail” traders are using to inform their trading decisions and drive more efficiency out of every trade.
But how does one become a quant trader?
People with mathematical or statistical backgrounds are probably the first candidates to get started as quant traders. Traders will only not only have to have a foundational understanding of high-frequency, algorithmic and automated trading. , but will need to build their own automated trading systems.
To be a quant trader, you must first have a very good foundation in the following: data analysis, data mining and research abilities.
You also need:
Experience with Technical Computing Software
Traders with a solid foundation in math and statistics tend to be well-versed in data analysis software. But in most cases, their application for quant trading is likely limited. For example, spreadsheets are normally used in data analysis, but for trade and research analysis training and practical application experience with software specific to quant trading, such as. MATLAB, is required.
The best way for traders to familiarize themselves with quant trading specific applications is to take advantage of free trials and demos..
Coding Ability
Typical trading applications allow plug and play functionality for an easier user experience, but for quant trading, this is not always the case. In most cases, experienced quant traders must know how to code in various languages (such as Perl,Python, Java and C++) in order for them to successfully build their own trading systems. This skillset will enable them to customize their trading setup and system for better quant trading.
Be a Market Data Geek
As Francis Bacon once said, “Knowledge is Power”, Every quant trader must have a deep familiarity with market data. Information must go beyond the typical set of open, high, low, close prices. A quant traders must understand the overall market data with regards to a specific stock (fundamentals) and other corporate actions that will have a direct impact in other products such as warrants, derivatives, OTC)
You will have to dig deeper for available market data. Try to get whitepapers and case studies for corporate actions. In those documents, there will be sufficient market data that traders with math and statistics background can build upon.
Understanding of Basic Trading Strategies
Though quant traders usually personalize and create their own trading strategies, it still helps to have a basic understanding of the commonly used trading strategies. Having this basic knowledge provides a steady foundation for anyone to advance as a quant trader.
Basic Risk Management skills
Risk management is often used by traders to prevent themselves from making a bad set of trades. Tactics such as scenario analysis, stop-loss systems, and limits on trading capital are all designed to save you from a bad order. And every quant trader should know these concepts as this may help protect against significant losses.
Continuing Education
With the proliferation of online courses and tutorials nowadays, you can easily find courses that are focused on trading. Try to find mathematics or statistics courses that offer electives.
Have a Quant Trader mindset
Every successful trade begins in the mind. Not every trader has the skills to be quant trader to start off, but it can be learned. Skills such as risk-taking, failure acceptance, working under stress and the ability to work long hours are some traits that every quant trader must have. The best way to find out if you have these traits is to do an honest self-assessment. Becoming a successful quant trader will all come from you.
Build your own quant trading prototype
As much as possible, try to build your own prototype to test out your quant trading concepts. This will give you a good assessment of your skills as a quant trader, as well as a practical application of your math and statistics background. Simply put, just do it and you’ll start learning right away.
With the aid of modern technology and algorithms, you can quickly get started. We hope that the mentioned points above will help you move forward as a quant trader, and have successful trades along the way. Happy Trading!
QuantConnect has recently partnered with Tradier Brokerage. This integration allows QuantConnect users to make trades within their platform via Tradier Brokerage.
To get started in Quant Trading, sign-up with QuantConnect.
This material is for informational purposes only. Tradier Brokerage Inc. does not recommend or endorse high frequency trading.
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