Whether discretionally or algorithmically, it is essential to have answers to some honest questions to be a successful trader. Trading can trick you into activities that may make you lose money at an alarming rate, so it is necessary to "know yourself" as much as it is necessary to understand the chosen strategy. There is always an option to form your quantitative trading strategy. This generally needs to have expertise in one or more of the following categories:
Market microstructure: Particularly for higher frequency strategies, one can make use of market microstructure, i.e., having an understanding of the order book dynamics to generate profits. Different markets have various technology-based regulations, limitations, market users and constraints. So many factors make a place open to exploitation via specific strategies. This can be sophisticated, and retail practitioners find it challenging to be competitive in this space, mainly when the competition includes large, well-capitalized quantitative funds with robust technological capabilities.
Fund structure: Accumulated investment funds, like pension funds, private investment partnerships/hedge funds, commodity trading advisors and mutual funds are restricted both by heavy regulation and large capital reserves. Thus, certain constant behaviors can be exploited with those who are agiler. For instance, considerable funds are subject to capacity restraints. Thus, if there is a need to rapidly sell off several securities, it must be staggered to avoid "moving the market" or a shock to the traders. Sophisticated algorithms take advantage in such a process known as fund structure arbitrage.
Machine learning/artificial intelligence: Classifiers, non-linear function matches and optimization routines have been used to predict asset paths or optimize trading strategies. With a background in ML/AI, you can easily have insights into how particular algorithms might be applied to specific markets.
There are numerous other areas of quants that can be investigated deeply in concern with formulating trading strategies. The more you learn, the better chances you stand to earn profits!
