INVESTOR SERIES
The Answer: Trend Chasing and Momentum Trading
Bonus: Arbitrage
Trend chasing and Momentum Trading
The most popular quant strategies involve trend chasing and momentum trading. Traders who design trend-chasing algorithms use the technical indicators of moving averages and strength indicators. Trades are executed based on trends that follow set parameters. This is a straightforward strategy as most quantitative traders use moving averages as a key indicator.
Arbitrage
A trader using a quantitative trading strategy can define their algorithm’s parameters to spot arbitrage opportunities. Arbitrate in trading can be when a stock is listed in multiple markets at a different price. Quant traders design algorithms to scan markets and purchase dual-listed stocks at a lower price and selling them at a higher price in a fraction of a second.
