Quantitative Trading

Strategy templates and building blocks Strategies merged to one trading in parallel 1 2 8. Strategy building on a Cloud based Virtual Machine Algotrading course 2.

How to add SQX strategies on Tradestation MT4 and MT5 showing different results Creating Strategies — Precision settings Multi Strategies on the same symbol and the same time frame for futures trading While it is not heavy on strategy ideas, it does present a framework for how to setup a trading business, with risk management ideas and implementation tools. This is a great book if you are completely new to algorithmic trading.

The book discusses mean reversion and momentum based strategies at the interday and intraday frequencies.

The second edition goes into significant detail on high-frequency trading techniques. If you plan to trade options in a quantitative fashion then this book will provide many research ideas. Quantitative finance blogs, link aggregators and trading forums all provide rich sources of ideas to test. Technical analysis involves utilising basic signals analysis indicators and behavioural psychology to determine trends or reversal patterns in asset prices. Despite being extremely popular in the overall trading space, technical analysis is considered somewhat controversial in the quantitative finance community.

Some have suggested that it is no better than reading a horoscope or studying tea leaves in terms of its predictive power! In reality there are successful individuals making extensive use of technical analysis in their trading.

Elite Quantitative Trading

As quants with a more sophisticated mathematical and statistical toolbox at our disposal, we can easily evaluate the effectiveness of such "TA-based" strategies. In the budget announced in the first week of July there was an increase in FPI surcharge. But the important question is how can you identify which securities or asset classes will have momentum and for how long will it persist? One of the most widely used methods is to calculate the past 12 months returns skipping the most recent months of security.

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Then, buy that security if the returns are positive and sell that security if the returns are negative. And hold this position for a month. Other methods to identify momentum are. Usually, a day moving average is considered a good timeframe to analyse the trend of a security price. If the security price is above day moving then buy the security and if the security price is below the day moving average then sell the security. Another well-known indicator is a cross-over of day and day moving average to signify the positive and negative momentum.

Breakouts can signal the start of a momentum.

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If the price of a security has been contained in a certain range and makes new highs, then it is a positive breakout and you can buy the security. Similarly, if the price of a security makes new lows then it is an indication of negative momentum and you can sell the security. However, these methods need to be complemented by mathematical and statistical tests such as Hurst exponent and variance ratio test to select the right securities. Also, the holding period varies based on the strategy and the security you are trading.

You can use technical analysis, correlation analysis or machine learning techniques to determine the optimal holding period.

We have covered about time-series momentum. However, more sophisticated traders use cross-sectional momentum.

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In this, the past relative returns of a set of securities are positively related to future relative performance. After you have identified the right set of securities, you need to create two sets of portfolios. Buy the portfolio which is expected to outperform and sell the portfolio which is expected to underperform.

You can form these portfolios based on the recent price performance of the securities. You can complement these by adding fundamental factors to it.