Discussing the article: "Quantitative analysis in MQL5: Implementing a promising algorithm"
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Check out the new article: Quantitative analysis in MQL5: Implementing a promising algorithm.
We will analyze the question of what quantitative analysis is and how it is used by major players. We will create one of the quantitative analysis algorithms in the MQL5 language.
What is quantitative analysis in the financial market? Quantitative analysis appeared as a kind of forerunner of machine learning, being in fact a subsection of statistical learning. Back in the days when computers just began to appear, took up an entire room, and worked on punched cards, progressive minds were trying to adapt them for analyzing big data and statistics. At that time the set of statistical operations and functions through which prices could be run was extremely small, the functions themselves were quite simple, and the patterns found were not particularly complex.
These studies were simple calculations to identify certain relationships in the data, mostly linear.
The simplest and easiest to learn method of quantitative analysis in financial markets is the analysis of the spread between related assets. For example, we can plot a spread between two correlated assets and, using quantitative analysis, find the average, maximum and median deviation of this spread. Having received a quantitative description of the data, we can understand how much one asset has deviated from the other, and roughly understand the equilibrium state of the two assets, where they both will definitely return when the discrepancy between them is eliminated (when the assets move towards each other). In general, the use of quantitative analysis in pairs trading is a very interesting topic; we will definitely touch on this point in future articles.
Author: Yevgeniy Koshtenko