5 min

What is Quantitative Trading as a Service (QTaaS)?

You’re missing out on the greatest (legal) money-making method in the world. Here’s how to get skin in the game:

The half-a-million dollar job

Quantitative trading produces BILLIONS of dollars of profits in the stock market, each year.

The most profitable funds in the world are quant-focused funds.

Quantitative traders, or quant traders for short, are the ones developing these quant-focused strategies. They’re usually highly specialized mathematicians with a thorough understanding of programming.

When applying their skill set to the financial markets, you’ll often start to see $500,000 paychecks.

“The average quantitative trader in the US makes $316,764. The average bonus for a quantitative trader is $125,000 which represents 39% of their salary, with 100% of people reporting that they receive a bonus each year” (Comparably).

That’s a paycheck of $441,764 for your average quant trader

I’m not suggesting that you devote your life to mathematics and programming to become a quant. But there is a way to get involved… more on this later.

Their in-depth knowledge of statistics combined with proficiency in coding languages such as C++, Python, and Java allows them to turn human behavior, real-world events, and market movement, into numerical values.

These numerical values are then used to identify opportunities within financial markets that can either be executed automatically, by an algorithm, or manually.

As you can tell, these opportunities are EXTREMELY lucrative.

Providing incredible “value”

In the world of Wall Street, “value” is absolutely measured in dollars.

Quant traders garner half-a-million dollar paychecks because of the incredible value they provide.

According to USA News, 4 out of the 5 top hedge funds in 2022 (and arguably in history) were either quant-focused or offered quantitative trading services.

  1. Renaissance Technologies (Medallion Fund) — Jim Simon’s Renaissance Technologies pioneered quantitative trading. With a head start on the rest of Wall Street, they’ve generated a 66.1% annualized return from 1988–2018, only losing money in one year,1989.
  2. Man Group Ltd. — While offering a variety of strategies, including quant funds, Man Group Ltd. outpaced the S&P 500’s 198% return by generating 357% over the past 10 years.
  3. Bridgewater Associates — Famously started by Ray Dalio, Bridgewater was an early mover in investing based on quantitative strategies. They’ve returned $52.2B in gains to their investors, more than any other fund on the planet.
  4. Citadel LLC —Public enemy #1 in 2021, Citadel boasts a 31-year annualized return of 19%. They’re a multi-strategy fund with quant-focused offerings, and one of the highest-paying quant hedge funds. They generated $8.2B in gains in 2021, the second most of any hedge fund.

Quant trading is the common denominator when generating billions of dollars in profits.

Why haven’t retail traders gotten access?

Barriers to participating in quant trading

There are two traditional routes to leveraging quant trading for yourself:

1. Invest in a quant-focused fund

However, the top-performing funds like the ones mentioned above are some of the most exclusive organizations in the world.

Fees for Bridgewater Associates range from $500,000 to $4,000,000 per year, per the New York Times.

Renaissance Technologies is one of the most enigmatic and secretive funds in the world. Their Medallion Fund is only available to current and former employees of Renaissance.

2. Become a quant and write your own strategies & algorithms

Again, this generally requires expertise in mathematics, 10+ years of coding experience, and comprehensive knowledge of financial markets (although this is not always needed).

Many individual retail traders have done this, but it’s obviously not the norm.

It stands to reason that quant trading remains reserved for the elite.

That was the case until 2022 when a new Medium article was published talking about quant-trading-as-a-service (QTaaS) and the first companies to unlock quant trading for the retail trader.

What is QTaaS, and how can I use it?

Instead of paying $500k in fees, getting my Ph.D. in mathematics, or calling my Uncle Phil who has “connections” at Citadel…

‘…what if I could subscribe to a service that provides trading signals developed using quantitative trading strategies?’

Platforms such as TradingView allow developers to share their trading scripts publicly. However, it’s rare to find complex statistical strategies that are publicly available. Most strategies found on TradingView rely on a couple of moving averages.

Indicator services such as SonarLab overlay a suite of tools onto your charts to help you identify trading opportunities. But, generally speaking, these services do not usually employ quant-focused strategies.

Additionally, indicators rely on a human to pull the trigger. A huge reason why quant trading achieved mainstream adoption, especially after the dot-com bubble, is that it removes the emotional variable of human traders (IG.com).

Quant-trading-as-a-service is the deployment of a complex, statistical trading algorithm that tells you exactly when to buy, short, or exit a security.

ScaleTrade is a startup that is using quant-focused strategies to develop the world’s simplest, most transparent trading signals.

Transparency means ScaleTrade publicizes their backtest results and tracks the performance of the algorithm in live trading — something that I haven’t seen anywhere else.

ScaleTrade’s algorithm outperformed the NASDAQ by 22.53% in its first two months of trading during one of the worst bear markets in decades, from April 27th to June 16th, 2022.

Conor, the lead quantitative developer/trader and co-founder at ScaleTrade, has worked with multi-billion dollar funds and has been contracted by many ex-hedge fund managers. He’s actively seeking a Ph.D. in mathematics and has over nine years of coding experience.

He’s joined by co-founders Andre Williams and Matthew Huo. Andre is an AI/ML engineer and data scientist at a Fortune 100 company. He previously worked at Boeing, AT&T, and several fintech startups. Matthew is a finance YouTuber with 100k+ subscribers and entrepreneur who previously worked in portfolio management at Hercules Capital.

ScaleTrade just publicly launched on July 15th, 2022.

And as a thank you for reading this article, you can use Code: ‘YourArticlesRule' to get 20% off your first month with ScaleTrade. Get access.

We may be witnessing the early days of the world’s first QTaaS company.