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Question: Why spend time here to explain the advantages of the quantification system? Isn't this an obvious thing?

idea: the advantages of quantification are obvious, but let's systematically talk about the advantages of quantification system, which may not be so obvious.

Question: So what's the use of systematically understanding the advantages of the quantitative system?

ideas: to give a simple example, I sometimes encounter a complex problem, and my thinking is easy to spread. I always come up with some strange ideas, and I spent a lot of energy to verify this idea. As a result, I found that these ideas have no obvious effect on the problem, that is to say, I have done a lot of useless work.

so what's the problem? Why do you do a lot of work, but you are thankless?

later, I realized that it was the focus of my problem solving or something went wrong in the general direction. Just like when playing chess, I always think about how my chariot and horse cannon should go, instead of analyzing where my opponent is on the chessboard, where his strength is weakest, where there are flaws, and in which direction my chariot and horse cannon should move strategically. (This metaphor may not be very appropriate, but I felt it in the process of playing chess.)

So I made myself a habit to know the essence of everything, so that I could know where to focus when doing things.

to sum up, I would like to explain the advantages of the quantization system here, that is, I want to know clearly where to start when I encounter problems, and the effect may be remarkable.

digression: Here's an excellent movie The Silence of the Lambs, Hannibal said the first principle of solving problems, which is the original words in the movie: first principle, simplicity. Read Macrus aurelius. Of each particle thing, ask: What is it in itself? What is its nature?

testability: the biggest advantage of quantitative strategy. Only by testing quantitative strategy according to historical data can we judge whether the strategy has potential profit opportunities and evaluate the systematic risk of quantitative strategy.

Measurability: In fact, it is the essence of quantification. By testing the quantitative strategy with historical data, the risks and benefits of the strategy are quantitatively analyzed, which provides a mathematical basis for the strategy to control risks and optimize capital allocation in actual transactions.

Consistency: Consistency is considered to be the biggest influence factor on trading profit. Consistency means that in the real trading scenario, the rules of risk management, buying point and selling point of quantitative strategy are consistent with historical backtesting. Only by maintaining consistency, the actual transaction results will be close to the historical back test results.

objectivity: the quantitative trading system is not influenced by people's intuitive feelings and opinions, which ensures the independence of the quantitative trading system.

Extensibility: Extensibility refers to an excellent quantitative strategy system, which can be extended to different markets, different times and different strategies.

As mentioned above, testability (historical backtesting) is the biggest advantage of quantification strategy. Then let's take a brief look at the benefits that historical backtesting can bring to us, which is also the direction of our later study:

For details, you can check the pictures of xmind:

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