iFX EXPO Dubai 2022: Quant Insight CEO addresses the 65-85% FX losers

The event, which took place at the Dubai World Trade Centre from 22-24 February 2022, brought together FX industry leaders from across the globe looking to engage with their peers, grow their business, and have fun.

Not only was there an incredible speaker lineup, but also in-depth public discussions between industry leaders and thousands of visitors.

As such, the event is where brokers go for more opportunities to grow their business, check on technology providers, spot the trends in the financial technology and digital asset industry, amongst others.

On that note, Finance Feeds had the chance to set up an interview with Mahmood Noorani from Quant Insight, a provider of quantitative financial market analytics that is bringing institutional-grade market intelligence to the average investor.

All opinions are equally valid and equally worthless

“We started attending some of the retail conferences and exhibitions about a year ago. This is one of the larger ones I’ve been to and definitely get the sense that it’s an industry that’s growing quite fast. It’s really driven by the explosion we’ve seen in the last couple of years in the number of retail traders. It’s growing and growing.”

The team at Quant Insight spent 20 years as portfolio managers in quite large household name hedge funds, and after the financial crisis, they became convinced that given the amount of data that is now available and the incredible cheapness of computing power, there was an opportunity to apply machine learning and data analytics to the world of macro.

“We were always very frustrated by macro because the world of macro tends to be the world of stories. Everyone has an opinion and all opinions are equally valid and equally worthless. And so we really wanted to start asking the data what was really going on in the markets”, said chief executive Mahmood Noorani, who co-founded Quant Insight in 2014.

“We’ve built a solution for the institutional world and over the last four to five years we have some of the largest hedge funds and asset managers as our clients. The AUM of our clients is something like $2.5 trillion”.

Data analytics for the price of a cup of coffee

Quant Insight has been providing world-class data analytics for institutional investors with much success, but the rise of the retail trader in recent years has come to their attention, sounding both promising and alarming as it is.

“We started looking at the retail market a couple years ago and what shocked us is that something between 65-85% of retail traders lose money. In fact, the average life of a retail account is 6 months from the time it opens to the time it hits zero.

“The institutional world is very well aware of quality market intelligence and that’s why they tend to keep it to themselves.”

“I guess we see ourselves as part of this whole democratization wave and our mission is to take this quite sophisticated analytics but then simplify it, make it very intuitive, and deliver it for the price of a cup of coffee to the retail trading world”.

Access without knowledge is a problem

The emergence of the retail trader was already taking place a few years ago, but it accelerated quite quickly with the COVID-19 pandemic. According to QI’s research, there were about 250 million retail trading accounts in 2015. The number exploded to 450 million, as of 2021, driven by millenials and gen Z, university educated with an eye on technology and finance.

“They tend to be gamers, you’ll find them on Discord. They are very interested as well in developing their online personas. Whatever makes them look smart, they embrace”, he said, pointing to Crypto as one of the drivers of this phenomenon. There’s no doubt the gateway to broader financial markets has been crypto. crypto has got them into trading. Now, they’re spreading their wings and looking at meme stocks and all sorts of other things”.

Access to trading the world’s markets has never been easier for retail traders, but access without knowledge is a problem, Noorani continued as he noted the challenge for the industry is to get it on a sustainable footing.

“An industry where 65-85% of clients lose money is not sustainable. It’s just gonna churn and churn and replace…and eventually run out of people who keep losing money. There’s a place for quality analytics.”

Quant Insight’s market data solution for retail traders is not a technical package. Instead, the platform takes high quality data from the economic calendar, including inflation, CB expectation, daily real GDP estimates, using cloud based processing and working with academics at Princeton, Cambridge, and Harvard, to reveal what’s driving asset prices.
“Given all the information about the Fed, inflation, etc, what are probabilities of assets going up or down. and with what confidence can the model say this?”

Data on 6,000 instruments and Stop Loss calculator

The platform covers more than 6,000 instruments and brings simple things to the table such as a reliable stop loss (SL) calculator.

“It’s not that hard to calculate the probability of being stopped out within 24 hours. Traders who come into trading set up their stops with tight SL and high leverage, get stopped out all the time and constantly lose money.

The firm’s retail brand is iQbyQi and offers a set of analytics that answers all kinds of questions, including “is the fed hiking rates”, “is Tesla a micro meme trade or is it trading off corporate credit costs?”

“We can measure based on all information available whether there’s a bullish or bearish leaning for a particular asset. That’s a second guide for the retail trader”, he explained, adding that the offering is currently available in emails and content, but will be launching the API in about 6 weeks.

iQbyQi will be all over the retail space as it partners with retail brokers and helps them improve education and analytics in order to attract clients and retain them as the rate of money losing traders drops. The firm is also going directly to retail traders through mobile apps.