In recent years, the market has been inseparable from one word, quantification.
It seems that every time the market falls, or retail investors are cut, quantitative trading is mentioned.
These two words seem to have become the most famous back-to-back man in the market.
The call for a ban on quantification has been very high, and the market has also introduced a series of restrictions on quantification, but there has been no mention of banning quantitative trading.
Why is that?
There are actually several main reasons for this.
First, quantification is an inevitable trend.
The use of quantitative trading is very extensive in the global trading market.
Not limited to stocks, but also in bonds, futures, and foreign exchange markets are very common.
A-shares can grow slowly, but it is impossible to go backwards.
Otherwise, overseas funds will definitely not enter A-shares, because even the most common quantification will be banned.
What's more, quantification itself is a trading strategy, and with the addition of programmatic trading, it becomes automatic trading.
The so-called wool picking is nothing more than a set of strategies that take advantage of the weaknesses of human nature in trading and earn excess returns.
Second, quantification is specifically introduced.
The opening of the quantitative gate is actually the need of the market, which is introduced by the upper level.
The reason why quants are introduced in large quantities is essentially to invigorate the market.
As some have said, without quantification, volume would have been reduced by at least half or more.
Quantitative funds are indeed suspected of wool, but they are also real money.
In addition to some high-frequency quantification, leverage may also be used to trade, and the long quantification of most stock strategies is still honest and disciplined.
Even if quantitative funds are plundered in the market, they are still funds to fill the pit, as long as they do not withdraw and leave.
This is actually the same as the introduction of big money.
Big money is also not for charity, and it is normal to make money by picking wool in large quantities.
Third, quantification is institutional use.
With quantification, they are basically professional investment institutions.
Except for a small number of retail investors, who have originally learned programming, may trade through quantification.
Most of them are professional institutional funds, and this part of the funds is the funds to be introduced by the market.
Most investment institutions now use quantitative trading methods.
The difference is mainly in the use of quantification, what kind of strategy it is.
Suffice it to say, there are some strategies that are aimed at retail investors, and there are also those that are aimed at making money on market trends, and the two are not quite the same.
It's just that high-frequency trading comes in faster, so there are more funds to do this kind of quantification, and the harvest is the same high-frequency trading retail investors.
In the future, the market may evolve into a mutual harvest of quantitative funds, competing whose strategy is better.
Fourth, quantification boosted the transaction.
In some ways, quantification really does a little bit of a job.
It is an indisputable fact that quantification boosts trading volume.
Many people will say that the large trading volume is due to high frequency, and the higher the frequency, the more leeks will be cut.
This is a reality, but it is not very complete, because quantization itself increases the opponent's market and enlivens liquidity.
Quantification only makes it easier for people who chase up and down to lose money, and it does not mean that it will necessarily make some value investors surrender.
Quantification is a double-edged sword.
Since some people want to boost trading volume and introduce quantification to take over, they must be prepared to accept the result of further quantitative retail wool, and this result is predictable.
In the endgame of any mature market, there is quantitative trading, and it will also go through a process of retail investors being swept away by quantitative trading.
Many mature markets have entered the stage of mutual PK between quantitative transactions.
That is, quantitative strategies compete with each other.
Originally, it was the army PK people, but it slowly evolved into the army PK army, which is faster than anyone's network speed and better strategy.
What should retail investors do in the new era of rampant quantitative trading?
On this point, we must first understand the underlying layer of quantification.
The bottom layer of quantification is not specifically designed for retail investors, but only uses programmatic trading to fix a set of trading systems, and then uses machines to continuously execute trading strategies.
Many retail investors actually have their own trading systems, but the difference is that the execution is completely different, the execution standards may be vague, and the probability of errors in actual combat is high.
In other words, the essence of quantification lies in being able to execute orders in cold blood.
The key is the bottom layer of quantitative strategies, which have been proven to be effective in past actual trading through big data backtesting.
With a proven strategy and indiscriminate execution of trades, the actual win rate will definitely not be low.
This is also the key to why quantitative strategies can ultimately outperform the market through high-frequency trading.
There is no need for retail investors to think about how to beat quantitative trading every day, because there is no point.
The machine will only execute instructions, and unless you know how its instructions are set, you can't crack them.
Retail investors should avoid becoming counterparties to quantitative trading, because even retail investors who are professionally trained in trading will not be able to execute more efficiently than programmatic trading.
In other words, retail investors can't compete with quantification.
A large number of strategies such as playing boards, which require hand speed, are being quantified to the wool.
If you add that the volume of quantitative funds is large, there is more room for accommodation in the gameplay, and retail investors are even more bruised.
Smart retail investors, from the trading of the Dragon and Tiger List, can actually find some quantitative clues.
Then the way to deal with quantization is actually very simple, which is to bypass quantification and avoid becoming an opponent.
If quantification is mainly based on high-frequency trading, then abandon high-frequency trading.
If quantification is mainly based on playing boards, then give up playing boards.
But wherever quantification often haunts, avoid it, and if you have to face difficulties, you must accept more losses and fewer wins.
Long-term investment is not easy to quantify.
The long-term here does not mean that you have to hold it for months, or even years.
The meaning of long-term investment refers to the investment method that ignores short-term fluctuations and focuses on the trend.
The key to this investment is not the buying and selling point of the trade, but the direction of the trend.
Relatively low-frequency investment, ignoring the accurate buying and selling point, will naturally avoid the scythe of quantification.
Doing index investment is not easy to quantify.
There is another category, which is index investment, buying ETFs, which is quantitatively impossible to cut leeks.
Although many people say that index funds also have quantitative play, such as grid trading.
But in fact, the arbitrage scope of grid trading is relatively limited, much worse than the stock market, after all, it is difficult for index funds to manipulate prices.
The quantitative scythe, wielded at every moment, is not aimed at retail investors, but at those who do not have trading principles.
However, as long as you can fix your own trading mode and moderately extend the trading frequency, quantification will not have much impact.