Secrets Behind the Quantitative Trading Bot

What is a quantitative trading bot?

Want to understand what is a quantitative trading robot? First of all, we must understand the basic concept of "quantitative trading".

Quantitative trading refers to the investment method of using computer technology to conduct transactions by means of modern statistics and mathematics. Quantitative transactions a variety of "high probability" events from a large historical data that can bring excess returns to develop strategies, use quantitative models to validate and solidify these rules and strategies, and then strictly enforce the established strategy to guide investment and to seek an excess return that is sustainable, stable, and above average.

After reading it, is it not clear yet? It doesn't matter, I will use understandable words to explain.

Quantitative trading actually does two things:

1. build a mathematical model (people)

2. according to the mathematical model, buy or sell at the right time (computer)

The first step is done by people, the second step is done by computer . Generally speaking, the quantitative trading robot refers to the second step: the computer judges when it should buy or sell according to a pre-written program. So you can simply think: computer program ≈ robot.

Quantitative trading has become a mature practice in the stock market. Because there are many similarities between the cryptocurrency market and the stock market, there are more and more studies on quantitative trading in the cryptocurrency market.

What is the use of quantitative trading bots?

Simply put, quantitative robots have two main uses:

arbitrage and market making.

The biggest use of quantitative trading is of course to make money or arbitrage! The biggest advantage of quantitative trading is to reduce the impact of investor sentiment volatility and avoid making irrational investment decisions in the face of extreme fanaticism or pessimism.

As the saying goes, investment is anti-human, at least in two ways:
1 I fear when others are greedy, I am greedy when others are afraid.

2 It is a good way to hold, but sometimes it is impossible to control your own hands, and you want to do something.

So the quantitative investment develops an objective reference indicator based on modern statistics and mathematics. When the condition is met, buy or sell without emotion to achieve above-average returns in high probability.

Quantitative trading can be used in arbitrage for ordinary people, but there is a second use for exchanges: market making, popularly speaking, is to stimulate trading. Because sometimes the trading volume of some tokens is too low, or less people trade in bear market, the market will be very deserted, and the more deserted it is, the less people will trade, thus creating a vicious circle.

With a market-making robot, the robot can act as a corresponding buyer or seller to trade to activate trading volume in the market. If there are no transactions in the market, it is not good for investors and exchanges. From this point of view, market-making robots have their value.

In the actual operation process, while promoting the skyrocketing volume, the robot is actually also leveling the transaction pairs between different digital currencies and the difference of the same digital currency pairs among different exchanges, avoiding unreasonable fluctuations in the market. In the futures market, it is also forced by the robot to close the position to ensure the normal operation of the futures market.

Quantitative trading strategy classification

In general, the arbitrage strategies for quantitative trading are divided into the following four types:

1. high frequency trading

2. CTA (Commodity Trading Advisor)

3. statistical arbitrage

4. Alpha

Income of quantitative trading bot

In fact, the use of quantitative robotic arbitrage is a typical silent way to make a fortune, because it is a niche market, people who know more will naturally make less money.

On the Internet, there are people using high-frequency trading. For example, someone actually gained 80 BTC from 200 yuan in the two years from August 2014 to early 2017. It’s amazing.

Of course, such a good day is definitely gone forever. But there is an old saying: the best time to plant a tree is ten years ago, followed by the present!

If I succeeded in arousing your curiosity in learning quantitative trading, please visit FMZ Quant to start your first step.

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