On Quantitative Trading

“After the recent major losses at quantitative hedge funds, many people have started to wonder if quantitative trading is viable in the long term.  Though the talk of the demise of quantitative strategies appears to be premature at this point, it is still an important question from the perspective of an independent trader.  Once you have automated everything and your equity is growing exponentially, can you just sit back, relax, and enjoy your wealth?  Unfortunately, experience tells us that strategies do lose their potency over time as more traders catch on to them.  It takes ongoing research to supply you with new strategies.

There are always upheavals and major regime changes that may occur once every decade but will nevertheless cause sudden deaths to certain strategies.  As with any commercial endeavor, a period of rapid growth will inevitably be followed by the steady if unspectacular returns of a mature business.  As long as financial markets demand instant liquidity, however, there will always be a profitable niche for quantitative trading.”

–From Quantitative Trading (2009) by Ernest Chan