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Quantitative Trading: How To Build Your Own Algorithmic Trading Business?

According to estimates, quantitative trading (also called algorithmic trading or automated trading) now accounts for more than 1/3rd of the trading volumes in the USA. Now, the question is: can a retail traders benefit by using quantitative trading bots? Is it possible for a person with limited resources and computing power to backtest his/her crypto or stock trading strategies and make more profits than the industry behemoths? 

Let me walk you through various aspects of algorithmic trading so that you can know how you can create your own quantitative trading business for more profits. 

What is Quantitative Trading?

Quantitative trading is the trading of cryptocurrencies, stocks, and other assets strictly on the basis of buy or sell decisions of computer programs or algorithms having pre-defined parameters and instructions. An easy example will help you understand better. 

Example of Quantitative Trading

Suppose, a quantitative trading software has been programmed with two simple instructions:

  • Buy Bitcoin BTC when there is a golden cross, where short-terms 50 DMA (daily moving average) moves above the long-term 200 DMA. 
  • Buy Bitcoin BTC when there is a golden cross, where short-terms 50 DMA (daily moving average) falls below the long-term 200 DMA. 

The concerned software will execute fast and instantly (without any lag due to emotional factors) when these pre-defined phenomenon takes place. The best thing about these trading bots is that you can backtest your trading strategy. Backtesting involves testing of the encoded strategy’s historical performance with that of historical financial data. 

Quantitative trading can include various aspects including technical and fundamental factors. On one hand, it can check technical charts and look for technicals such as head and shoulders pattern formation, on the other, it can also look at fundamental data such as debt-to-equity ratio, cash flow, revenue, crypto coin circulation/24-h volume, and other factors. 

Highfrequency trading HFT is part of automated trading that helps you make more profitable trades in lesser time period. This is possible simple because the algorithmic software finds more trading opportunities faster than humanly possible. 

It is these quantitative trading software that helps individuals to make more profitable trades than any fund manager by using wide array of digital assets, financial instruments, trading ideas, futures trading, statistical models, technical analysis, fundamental analysis, and many more. In fact, institutional traders are also using automated algorithmic trading for more profit. In fact, ordinary traders can also use automated quantitative analysis for trading and making profits. They don’t have to be quantitative researchers to make lots of money from trading. 

Do you have to be a Computer Wizard to Start a Quantitative Trading Business?

You don’t have to be a computer whiz, know complex mathematical modeling, have indepth quazntitative finance knowledge, or significant amount of money to start quantitative trading. 

You should have some basic statistics knowledge such as:

  • How to calculate averages?
  • What is standard deviation?
  • If there is a set of data points, what is the way of fitting a straight line through them?

In addition to these basic statistical knowledges, you should also have some familiarity with Excel. However, don’t need to have knowledge of advanced statistical aspects such as neural networks, stochastic calculus, or other advanced techniques. 

Though it is not absolutely necessary, knowing MATLAB mathematical tool is very helpful. This tool is used by many institutional quantitative strategists as well as portfolio managers. If the price of MATLAB is expensive for you, affordable alternative are also available. In case, you are a student, you can either get free access through your school/university or buy a cheaper student MATLAB license. 

Who Can Become A Quantitative Trader?

You don’t have to be a engineer, mathematician, physicist, or computer scient to become a quantitative trader. You can simply have high school-level knowledge of mathematics, economics, statistics, and computer programing knowledge, and a basic understanding of basic statistical arbitrage strategies to become a quantitative trader. 

Always check transaction cost, historical data, execution system or trading system, guide to quantitative trading, quantitative finance, sure-shot trade winning strategies, and many other key components before becoming a full-scale quantitative trader.

What would you Need to Start a Quantitative Trading Business?

You can start your algorithmic trading business with a small initial investment of around US$50,000. However, you can scale up the business as you acquire more knowledge, trading acumen, and the business becomes more profitable. The most important factors for starting a successful quantitative trading business are:

  • Scalability

This business is highly scalable, which you can perform from the comfort of your home. As long as your trading strategies are consistently profitable, you can use leverage or margin trading to trade millions of dollars. There is no need to make negotiations. The brokerages are more or less similar in all brokerages. 

You can use up to 40x leverage (depending upon the brokerage you are choosing) to trade on the basis of your initial investment of US$50,000. This means, with your US$50k investment, you can trade a portfolio that is worth US$2 million. However, always keep in mind that quantitative or algorithmic trading is not a get-rich-quick scheme. So, always manage your risk and money accordingly. If possible, use  financial metric like Sharpe ratio to risk-adjusted return. 

  • Demand on Time

In comparison to small businesses, quantitative trading business needs lesser time. The lesser you interfere with the decision made by the trading bot the better. The extent of your time in the trading business depends upon the degree of automation you have achieved. 

  • No Need of Marketing

If you are doing quantitative trading for yourself, there is no need for marketing. If you are managing money for other then you may need marketing efforts. In most cases, algorithmic trading businesses are done by individuals by themselves. In such cases, you don’t have to concentrate or spend money on marketing. 

What are the Popular Strategies for Quantitaive Trading?

  • Mathematical Model-based Strategies such as delta-neutral trading strategy
  • Arbitrage Opportunities
  • Volume-weighted Average Price (VWAP) strategy
  • Percentage of Volume (POV) strategy
  • Trend-following Strategies
  • Index Fund Rebalancing
  • Mean reversion or trading range strategy
  • Implementation Shortfall strategy
  • Time Weighted Average Price (TWAP)

What is the Best Quantitative Trading Bot? is definitely the best quantitative trading bot. It is a cloud-based platform, on which you can connect to major exchanges such as Binance, Bitmex, Bitfinex, OKEX, Kraken, Bitstamp, and Bitpanda. 

The best thing about the Napbots trading software is that you don’t have to monitor charts and candles to predict your next move. Any novice trader with zero skills can also start trading like a pro and earn money with this unique trading tool. Let Napbots take full control over your trades in just a few clicks. Now, sit back and enjoy earning money. 

You may also check “Napbots Review - Simple Way To Increase Your Crypto Returns” before taking the plunge. NapBots crypto trading software is special because it comes with:

  1. A unique trading algorithm that processes market data for you 
  2. A unique crypto trading bot library so that you can create your own mix of trading strategies
  3. Autopilot mode that enables you to automate trading 24x7
  4. An easy-to-use interface so that you can copy the proven strategies of NapBots to make successful trades and make money

You should choose as your preferred quantitative trading software because:

  • NapBots offers complete trading automation solutions through the use of its own tested trading strategies; offering quantitative trading strategies previously reserved for hedge funds to the public. 
  • The setup and installation process are easy. So, the non-experts can also use it. The simple and special approach of NapBots helps it provide you with excellent ROI. 
  • The team of professionals behind NapBots has extensive experience in the financial market. They have put their years of experience in place so that you can easily automate the management of your funds with no technical skills. This service can run 24/7 and work as your passive source of revenue even when you sleep. 

How to Get Started with NapBots?

NapBots is easy to start with. It involves just 3 steps:

Step #1: Connect to one of the available trust exchanges.

Step #2: Select from the unique list of performing Bots of NapBots

Step #3: Choose a plan that suits your investment style

Once you have completed these three steps, NapBots is ready to trade cryptos and earn money for you. Happy Trading!