In recent years, the market has been inseparable from a single term: quantification.

It seems that every time the market falls, or retail investors are "harvested," the topic of quantitative trading comes up.

These two words seem to have become the most famous scapegoat in the market.

The call to ban quantification has always been high, and the market has introduced a series of restrictions on quantification, but it has never mentioned the prohibition of quantitative trading.

Why is that?

There are actually several main reasons.

First, quantification is an inevitable trend.

The application of quantitative trading is very widespread in the global trading market.

It is not limited to stocks; it is very common in the bond, futures, and foreign exchange markets.

A-shares can develop slowly, but they cannot regress.Otherwise, overseas funds will definitely not enter the A-share market, because even the most common quantification is to be prohibited.

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Moreover, quantification itself is a trading strategy, and with the addition of programmatic trading, it becomes an automatic transaction.

The so-called "sheep shearing" is nothing more than a set of strategies that exploit the weaknesses of human nature in trading, earning excessive returns.

Secondly, quantification is particularly introduced.

The opening of the floodgates of quantification is actually the need of the market, and it is introduced by the higher-ups.

The reason why a large amount of quantification is introduced is essentially to enliven the market.

As some people say, without quantification, the current trading volume would be reduced by at least half.

Quantitative funds do have the suspicion of "sheep shearing," but they are also a real investment.

Apart from some high-frequency quantification, which may also use leverage for trading, most long stock strategy quantitative funds still abide by the rules honestly.

Even if quantitative funds plunder in the market, they are at least filling the pit, as long as they do not cash out and leave.This is actually the same principle as introducing large capital.

Large capital is not entering the market to do charity either; it will also make a lot of money by taking advantage of opportunities, which is quite normal.

Thirdly, quantification is used by institutions.

Those who use quantification are basically professional investment institutions.

Apart from a small number of retail investors who originally studied programming, they may trade through quantification.

Most of the funds are professional institutional funds, and these are the funds that the market wants to introduce.

Most investment institutions are now using quantification for trading.

The difference mainly lies in the use of quantification, what kind of strategy is it.

It can be said that some strategies are aimed at retail investors, while others are designed to earn money from market trends, and the two are not quite the same.

However, high-frequency trading makes money faster, so there are more funds doing this type of quantification, and what they are harvesting are the same high-frequency trading retail investors.The future market may evolve into a situation where quantitative funds harvest each other, competing to see whose strategy is more outstanding.

Fourthly, quantitative has indeed boosted trading volume.

In some respects, quantitative does have some credit.

The fact that quantitative has boosted trading volume is indisputable.

Many people will say that the large trading volume is due to high frequency, and the higher the frequency, the more "chopsticks" are cut.

This is a reality, but it is not very complete, because quantitative itself has increased the counter parties and activated liquidity.

Quantitative only makes it easier for those who chase rises and kill falls to lose money, but it does not necessarily mean that it can make some value investors surrender.

Quantitative is inherently a double-edged sword.

Since some people want to boost trading volume and introduce quantitative to take over, they should be prepared to accept the further result of quantitative cutting the wool of retail investors, and this result is foreseeable.

Any mature market will eventually have quantitative trading, and will also go through a process where retail investors are cut by quantitative trading.Many mature markets have already entered the stage of quantitative trading, competing with each other in a PK (Player Killing) manner.

In other words, it's a competition between quantitative strategies to see which one is superior.

Originally, it was the army competing against civilians, but it has gradually evolved into the army competing against the army, to see who has faster internet speed and better strategies.

In the new era where quantitative trading is rampant, what should retail investors do?

To understand this, one must first understand the foundation of quantitative trading. The foundation of quantitative trading is not specifically designed for retail investors; it simply uses programmed trading to establish 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 lies in the completely different execution power. The execution standards may be vague and unclear, and the probability of making mistakes in actual combat is very high.

That is, the essence of quantitative trading lies in its ability to execute orders ruthlessly.

The key is the foundation of quantitative strategies, those strategies have been proven to be effective in past actual combat trading through big data backtesting.Implementing transactions indiscriminately with strategies that have been proven in the past will certainly not result in a low actual win rate.

This is also why quantitative strategies can ultimately outperform the market through high-frequency trading.

Retail investors do not need to consider how to beat quantitative trading every day, as it is meaningless.

Machines only execute instructions; unless you know how their instructions are set, there is no way to crack them.

Retail investors should avoid becoming opponents of quantitative trading because even those who have undergone professional trading training will not surpass the execution efficiency of algorithmic trading.

That is to say, retail investors cannot compete with quantitative in terms of speed.

A large number of strategies that require speed, such as hitting the board, are being exploited by quantitative.

If coupled with the large capital volume of quantitative funds and more flexible play, retail investors will be even more battered.

Smart retail investors can actually find some clues of quantitative from the transactions on the dragon and tiger list.

So the way to deal with quantitative is also very simple, which is to avoid quantitative and avoid becoming an opponent.If quantitative trading is primarily focused on high-frequency trading, then abandon high-frequency trading.

If quantitative trading is mainly based on hitting the board, then give up hitting the board.

Wherever quantitative trading is common, avoid it. If you must face the challenge, be prepared to accept more losses than wins.

Long-term investment is not easily quantified.

Here, long-term does not necessarily mean holding for several months or even years.

The meaning of long-term investment refers to an investment approach that ignores short-term fluctuations and takes the trend as the main line.

The key to this kind of investment is not the trading buy and sell points, but the directionality of the trend.

Relatively low-frequency investment, ignoring the precise buy and sell points, naturally also avoids the quantitative sickle.

Index investment is not easily quantified.

There is another category, which is index investment, buying ETFs, which is a place where quantitative trading cannot cut the leeks.Although many people say that index funds also have quantitative trading strategies, such as grid trading.

In reality, the arbitrage range of grid trading is quite limited, far less than that of the stock market, after all, it is very difficult to manipulate the price of index funds.

The quantitative sickle is swinging every moment, not targeting retail investors, but those funds without trading principles.

As long as you can fix your own trading model, and moderately lengthen the trading frequency, quantitative will not have too much impact.