1. What is strategic trading?
Foreword:
Strategic trading is the use of quantitative strategies for trading. Traditional financial markets are also often called quantitative strategy trading.
Why learn strategic trading?
When investors conduct manual trading, the time span they can observe is short and the sample data is small. They often trade based on short-term observed rules, but the results are often unsatisfactory. In the process of finding effective trading strategies and technical parameters, manual traders often need months or even years of trial and error, wasting a lot of money, the sunk costs are very high, and not all efforts can yield positive returns. , there are many investors who have more than ten years of trading experience but are still losing money, which makes trading a very expensive activity and makes many people become averse to trading.
With the development of computer technology, strategic trading has become an important tool to improve this situation. Strategic trading uses advanced mathematical models to replace human subjective judgments, and uses programs to select various high-probability events that can bring excess returns from historical big data to formulate corresponding strategies for trading and reduce investor emotional fluctuations on transactions. Especially during market frenzy or crash, avoiding irrational trading behaviors can greatly shorten the trial and error process and reduce sunk costs.
2. Quantitative strategy trading is the trend
With the rapid advancement of Internet technology, big data, artificial intelligence, and cloud computing have begun to change all walks of life, including the financial field. Finance is being integrated with information technology, mathematical models, and data analysis, and investment is gradually shifting from manual trading to quantitative strategy trading.
Quantitative strategy trading has been around for a short time in China. In fact, it has existed for a long time. It has a history of more than 30 years overseas. Due to the discipline and systematic nature of quantitative models, returns are more stable and market share continues to expand. According to statistics, more than 70% of the world's funds are using quantitative strategies to trade, and it is estimated that 20% of the funds in the domestic market are also using quantitative strategies to trade. Almost all of the world's top investment banks deal in quantitative strategies, such as James Simons' Renaissance and Ray Dalio's Bridgewater Associates. Quantitative strategy trading representative - James Simmons, with an average return of 35% from 1989 to 2008; value investment representative - Warren Buffett, with an average return of 20% from 1989 to 2008. The quantitative strategy trading record is very amazing.
Quantitative strategy trading is the future trend and is recognized by more and more people. Why is quantitative strategy trading so popular?
3. What are the advantages of quantitative strategy trading?
1. Save a lot of time on market tracking and quickly capture trading opportunities
Manual trading often requires traders to spend a lot of time watching the market to capture trading opportunities. In the ever-changing market, it is easy to miss trading opportunities, or fail to process positions in a timely manner according to the market situation. Most of the time, the market market has no clear direction. This is This results in manual traders being very inefficient. Quantitative strategy trading uses programs to automatically execute established strategies and can capture trading opportunities 24 hours a day. Even if extreme market conditions occur, you can enter and exit the market immediately according to the strategy, without the need for humans to judge the various details of the transaction in real time. It greatly improves transaction efficiency and saves investors a lot of time and energy.
2. Quantitative strategy trading is very efficient, reducing trial and error costs and improving trading awareness.
Manual trading requires a lot of time and money to find effective trading strategies, but quantitative strategy trading can use massive historical data and backtesting systems to generate a large number of trading strategies in a short time, such as a few days, and interpret them from many aspects. The advantages and disadvantages of the strategy, find out the most effective trading system and technical parameters. You can comprehensively examine the feasibility of the strategy without the need for real money, which is very efficient. Quantitative strategy trading does not require real money for trial and error, and can greatly reduce investors’ sunk costs. Moreover, using quantitative strategy trading can quickly improve users' understanding of trading, such as how to determine the trading direction; how to set entry and exit conditions; how to adjust the position size; how to control strategic risks; and comparison of final returns and market trends, etc. Even if users complete a simple and complete strategic transaction, they can quickly improve their understanding of trading.
3. Positions are more reasonable and account risks are reduced
Manual traders have limited energy and can only run a few strategies, manage a few accounts and a few positions, which can easily lead to overweight positions. Once the market changes drastically, resulting in large changes in positions, it is difficult for manual traders to take into account the position proportion of the entire account and strategy, resulting in positions that may always be in a high-risk stage. Quantitative strategy trading can manage a basket of accounts and numerous strategy combinations at the same time. Multi-strategy and multi-account combinations run simultaneously and operate independently of each other without interfering with each other. The strategy can intelligently adjust positions according to market conditions, and accurately calculate the positions and capital ratios of multiple strategies and accounts, avoiding the irrationality and randomness of manual orders, causing imbalances in capital ratios, and greatly reducing the risk of the entire account.
4. Reduce transaction costs and hide the whereabouts of large positions
Transaction costs are a cost item that cannot be ignored in transactions, especially for large-capital users. A single concentrated order may drive up the market, leading to soaring transaction costs and other issues. At the same time, users will also expose their trading intentions and transaction details, causing the market to follow suit. Quantitative strategy trading, such as iceberg entrustment, can split large orders when placing orders, hide entry, and reduce transaction costs.
4. What are the disadvantages of quantitative strategy trading?
Quantitative strategy trading has many advantages and disadvantages.
1. Quantitative strategy trading is highly professional and the threshold is high. Investors not only need professional trading knowledge to write a trading strategy that can make positive profits, but also have certain programming skills to be able to program the trading strategy and successfully run. At the same time, backtest the historical returns of the strategy and adjust trading strategy parameters and other details. The cost of learning is too high, shutting out most investors, so quantitative strategy trading has always been niche. ,
2. Quantitative strategy trading is based on historical data to test the effectiveness and profitability of the strategy. This causes quantitative strategy trading to easily fall into the trap of historical data and over-fit historical data. This results in the strategy making good returns during backtesting, but in practice. The profit is not necessarily ideal.
3. Once erroneous instructions appear in quantitative strategy trading and the program lacks risk control, the strategy may be shut down, or it may cause catastrophic consequences. For example, in the 8.16 Everbright Securities Oolong Index Incident, problems occurred in the arbitrage strategy system and a huge amount of market price was generated. According to entrusted orders, many heavyweight A-share stocks hit their daily limits, and the Shanghai Composite Index instantly rose by 5.96%.
5. One Piece’s quantitative robot lowers the threshold
In order to solve the problem of high trading threshold for quantitative strategies, the team has developed a series of relatively mature quantitative strategies. Users do not need to write trading strategies or program to run programs. They can use them directly. In addition, many intelligent modes have been launched to provide strategy parameters, which is very convenient. It greatly lowers the threshold for users to use quantitative strategy trading. Quantitative strategy trading is a very useful trading tool and is receiving more and more attention. Various quantitative strategies have different applicable market conditions. Users need to understand how to set parameters for different strategic trading products and when to use them most efficiently, etc. For example, the current market is in a downturn and prices have fallen sharply. If users want to buy at the bottom, they can refer to the fixed investment strategy for how to buy more effectively. In a volatile market, if you simply hold digital assets, the income will be very small. At this time, you can consider the spot grid. Strategy. If the strategy is not used properly, for example, when the price continues to fall, using the spot grid, there may be a situation where the position is full and locked up. Not only will no profit be obtained, but serious losses may occur. For this kind of problem, AI trends are specially added to determine the direction according to the indicators to avoid Full position locked up.
This requires us to have a deep understanding of strategic trading products, understand the internal logic of the trading systems of different products, where the risk points are, how to choose different investment targets, etc., which will all affect the final return of the strategy. I would like to know more about quantification. Please stay tuned for content!