What are the main categories of systematic trading strategies (e.g. momentum, mean reversion), as might be considered by an index or fund-of-fund analyst?
Are there any common sub-strategies?
Answer
There are other strategy types not covered by mean-reversion/trend following:
arbitrage - keep correlated assets close in price (SPX index versus the 500 stocks contained in it, or Gold trading in London versus Gold trading in New York)
market making - buy on bid, sell on ask, gain the spread
liquidity rebate - some venus pay you for putting limit orders in the book. Put in a limit order to buy, when it's hit try to sell at the same price that you bought at (or better) and gain the rebate. Works best on high volume, low price assets.
predatory trading - seek big hidden liquidity in the market and front-run it
behavioral trading - quantify market sentiment and trade on it (analyze tweets, determine global/regional mood and use known psychological theories to predict the effect on market behavior)
event trading - analyze news (electronic, paper, blogs, twits) and predict market impact of new relevant facts (litigation, new products, new management, ...)
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