In recent years the word trading has been very present in the financial world. However, their ways of acting are hardly known. With technological advances, the exclusivity of the trading operations of brokers and large speculators was eliminated, and at the same time, new possibilities for analysis were created in an increasingly complex and unstable financial park.
Professionals trained with diploma courses in banking and finance are increasingly in demand to make a difference, best banking institute experts will tell you why:
The so-called classic trading is based on technical analysis and classic market indicators . This trading is also influenced by the psychology of the trader, susceptible to being carried away by emotional feelings in the market.
In technical analysis, trading decision making is based on quotes, from which it tries to look for recurring patterns that can predict future price behavior. Although this may be the basis of quantitative trading systems, it differs in method and form.
In the technical analysis of classic trading, chartisms and visual graphics analysis are used in which a subjective component is involved, incompatible with quantitative trading. Classic trading works by subjective and personal decisions trying to take advantage of trends to obtain profitable operations.
Any specialized training in economics will prepare you to handle risk situations. However, a Master in banking & finance courses will provide you with new and proven mathematical methods to face the market.
Quantitative trading is based on fundamental analysis. For this, it takes into account the fundamental ratios of the companies, to define the strategies and the underlying ones that you will use.
Quantitative trading examines numerical variables, does not take into account other aspects that cannot be reliably quantified. This is the case of the change of the CEO of a company or the results of the presidential elections.
Working based on these numerical variables , the quantitative analysis applies mathematical and statistical methods to establish models that allow the development of trading systems . In these statistical and mathematical processes is where analytical algorithms and software come into play that allow to automate and increase the efficiency of these processes, which is also known as algorithmic trading, in which all the rules are written in the computer code of the system.
Differences and Similarities
Both aim to solve the same problem. This is, to redefine the direction that the price could have in the future. However, they have a different approach. While in the fundamental analysis of quantitative trading quantitative data and numerical values are studied, studying the causes of movement, technical analysts obtain the information and make their predictions and reports in a more subjective way, trying to study the consequences.
There are several differentiating factors between the working methods of a specialized trader and a classic trader. They are as follows:
Subjectivity: Classic trading has a subjective component that in quantitative trading is replaced by mathematical operations.
Chartism: In classic trading, graphical representations are decisive for the analysis of the trader who will interpret them and make their decisions. Representative charts can be created in quantitative trading but the decisions come from the programmed trading system.
Discretionary or non-discretionary: Quantitative trading is not discretionary, that is, operations are taken according to pre-established rules. On the contrary, the trader who operates based on technical analysis does make discretionary decisions.
Advantages of Quantitative Trading in a Quantitative Finance Master:
As you have been able to verify the quantitative investments, they are based only on statistical principles where computer algorithms come into play. Therefore, the advantage with respect to classic trading is that absolutely nothing is left to the edge of subjectivity, all the decisions of quantitative trading systems are based on data.
Therefore, quantitative traders require a wide spectrum of knowledge not only at the economic and market level, but also in mathematics, statistics and algorithmic programming. This high degree of training specificity is achievable thanks to the higher training offered by a banking and finance diploma, in which not only knowledge is provided but also the tools and practices to apply it, converting students to a Master in Quantitative Finance in one of the most desired professionals.