Since I’ve covered the basics of quantitative trading in my four-part series, I thought it was time to approach the subject from a different angle and explore how one gets into this field. As I’ve said before, quantitative trading is a precise, mathematical occupation. It requires a good understanding of mathematics and statistics, as well as technology.
I’ve always considered myself to be more quantitative than qualitative, and I didn’t exactly know what I wanted to do after selling my 3D graphics company in Israel and coming to the US in 2002. I knew that I was good at math, so I saw an opportunity in trading, starting with manual trading and then utilizing my computer science background and branching out into writing my own programs. In 2013, I founded my own quantitative trading company, qSpark, and I haven’t looked back since. Not everyone follows such a linear path to becoming a quantitative trader, though, and not all quantitative traders are entrepreneurs as I became. There are many paths one can take to becoming a quantitative trader as long as one possesses the proper background, but I came upon an article from Investopedia detailing how a person with a mathematical or statistical background can get into quantitative trading, and I thought some of the tips were worth sharing. So, without further ado, here are the areas that anyone interested in quantitative trading will need to be proficient in.
1.Familiarity with data analysis software and applications
It is necessary for any quantitative trader to have solid experience using data analysis software and applications, but more than that a person with a mathematics/statistics background should also be adept at using trading applications. Data analysis lays the groundwork for a career as a quant trader, but it would be well worth one’s time to practice using trading applications for some hands-on experience that will help you stand out in a sea of other applicants for quant trading positions.
2. Programming skills
I started out writing my first trading platform many years before founding qSpark. Someone with a finance or mathematics degree may be well-suited for a career in quantitative trading, but it certainly helped, in my case, that I had a B.A. in Computer Science, in addition to my MBA.
According to Investopedia, “Successful quant traders require the ability to conceptualize and build trading systems on their own, which can only be accomplished by computer programming.” It’s crucial for anyone starting out as a quant trader to be familiar with at least one of the most commonly-used programming softwares, such as Python and C++.
3. Familiarity with market data
If you want an insider’s understanding of the stock market, then you’ve got to do your homework and study the market. But more than just the standard highs and lows of the market, a quantitative trader should have an understanding of overall market data relating to corporate actions and specialized products such as warrants and derivatives, in addition to stocks and bonds. The internet is your friend when it comes to brushing up on your market data knowledge; a variety of documents and news stories, as well as paid courses and certifications, are available. Take it even a step further and familiarize yourself with the market microstructure including its various exchanges, the differences among them and the proliferation of order types to name a few major highlights, which are paramount to get a good grasp of.
4. Understanding of trading strategies and risk management
An understanding of commonly used trading strategies is essential for quantitative traders who will need to build their own strategies. Additionally, risk management, as I discussed in my introduction to quantitative trading, is a major component, so an aspiring quantitative trader should understand the criteria employed to manage risk in a trading system.
5. Proper educational background
Lastly, it is not mandatory, but certainly beneficial, that a quantitative trader come from the proper educational background, meaning math, finance, business, computer science, and statistics majors are often suited for a quant trading job- anything that emphasizes data and analysis, and quantitative thinking over qualitative.
These tips are all useful for anyone interested in a quantitative trading career, but ultimately you need to ask yourself if this is something you could really see yourself doing. If you’re good with numbers and data, passionate about trading and programming your own systems, and aspire to be a quantitative trader, then don’t be afraid to go after your dream!