Quantitative Trading and How to Use Your Algos More Effectively
In today’s trading world, the difference that sets aside the style from trading years ago are a few factors. The old style of buy and hold has taken a backseat to the fast pace of today’s trading. Instead of waiting weeks to years, trades can be done in a matter of minutes, with the trader walking away with a profit. Smart traders will be thinking about maximizing their portfolios, by investing in as many different markets to prevent a bad trade from getting out of control. This is termed as quantitative trading, and if you are serious about earning money from the market, you really should learn more about this trading style.
In simple terms quantitative trading is trading in many markets instead of trading in a single market. Some people might bring up the argument that doing this poses more risk, but the truth of the matter is it safeguards your portfolio instead. The way it works is to invest in markets that are moves differently to your current trades. An easy example is between the S&P 500 and gold, when the market moves up gold prices drop. By placing trades in both markets, no matter how the market reacts you will still have a winner.
When you are doing this kind of trading one important thing you have to remember is the human mindset. All amateur traders have a fatal flaw of holding on to bad traders longer than good trades. Years of training are required to get rid of this habit, or you can think about using automated trading systems to do it for you. Since all trading is now done on computers, you can program your method of trading on your computer and walk away. The key factor you have to remember when you are doing this is the trust you have in your method.
There is no system or method in the world that wins 100% of the time. That is something that is just not possible. When you see a bad trade made in your automated system, you have to control your emotions and not be flustered about it. Remember that as long as you have more winners than losers, you will still walk away with a profit. People that tinker around too much with a good method, only end up making things worse. You do not want to fall into this same trap and waste time and money. Trust your method and let the computer do the hard work, while you are sipping coffee and enjoying life.