The Decline of Retail Investors' "Presence": Has Quantitative Trading Taken Over the Market's "Micro-Price Setting Power"?

Recently, as the activity level of speculative capital in China’s A-share market has been trending downward, the notion that the “era of speculative capital is coming to an end” has sparked heated discussion among people in the know. As of the end of February 2026, the number of domestic private fund managers with assets under management in the billions (RMB) has hit a new historical high, and the number of “billion-scale” quantitative funds has even surpassed subjective long-only funds for the first time.

Some insiders from private fund institutions believe that quant strategies, thanks to their speed advantage, discipline, and full-market coverage, have formed a crushing edge in the game of high-frequency trading, micro-level fluctuations, and limit-up/limit-down contests, greatly compressing the survival space of traditional stock-picking strategies like “buying at the daily limit,” “relay trades,” and pure emotion-driven games. In addition, quant strategies rely on dedicated channels, millisecond-level order placement, and algorithms that can accurately capture market sentiment—effectively “racing a supercar on a pedestrian walkway,” which also leaves ordinary retail investors, discretionary capital, and quant strategies at a disadvantage in the “micro price-discovery power” contest.

The “presence” of speculative capital declines

As of the end of February 2026, China has 126 private fund institutions with assets under management in the billions, and most of the new entrants are quantitative funds.

A reporter from The Economic Daily News noticed that recently, commentary circulating in the market includes viewpoints such as “the end of the speculative capital era” and “quantitative strategies change the rules for speculative capital.”

Judging from the data on the龙虎榜 (Top Trade Lists) since this year began, the “presence” of speculative capital has indeed decreased. According to data from Tonghuashun, in January this year, the average number of listed stocks traded by speculative capital brokerage seats was 72 per day; by February (with fewer trading days), it fell to 58, and in March (as of March 19) it further dropped to 57. Notably, on January 12, the number of listed stocks in which speculative capital brokerage seats participated once reached as many as 106.

In addition, the reduction in the number of stocks that achieve multi-day limit-up (连板) is also a reflection of declining speculative capital activity. According to Choice data, this year to date, there are only 15 A-share stocks with more than 5 consecutive limit-ups; by comparison, in last year’s third and fourth quarters, there were as many as 20 and 35 A-share stocks respectively with more than 5 consecutive limit-ups.

Commenting on this phenomenon, Shu Qiquan, general manager of Shanghai Qianbo Asset Management, told a reporter: “As a discretionary trading participant, although I believe it is an exaggeration to say ‘the market is completely controlled by quant and human traders surrender,’ the short-term trading ecosystem has indeed undergone an irreversible change. The recent decline in speculative capital activity and the weakening of the consecutive-limit-up effect are the combined result of three factors: quant crowding out, tighter regulation, and changes in market structure. Quant strategies, with their speed advantage, discipline, and full-market coverage, form a crushing edge in high-frequency, micro-level fluctuations, and the limit-up/limit-down game, massively compressing the survival space of traditional consecutive limit-up trading, relay trades, and pure emotion-driven games—this is an objective fact.”

At the same time, Shu Qiquan believes that quant trading is also disrupting market structure.

“First, the average daily trading volume share of A-share quant strategies reaching 30%~40% is widely perceived across the industry. This size is enough to change micro trading structures—such as thinner order books, more violent volatility, stop-loss orders being triggered more easily, and short-term sentiment being amplified more easily. From this perspective, quant strategies do increase the risk of stampedes and herd behavior. In stocks with generally average liquidity, this distortion is especially obvious. Second, it is basically true to say that quant strategies ‘deviate from value investing.’ Most high- and mid-frequency quants focus on statistical arbitrage, trend following, and volatility arbitrage. They don’t study company fundamentals, don’t look at industry logic, don’t care about long-term value—only make money from trading counterparties. When this kind of capital proportion becomes too high, the market indeed becomes more prone to slide into a zero-sum game, short-term speculation colors intensify, and the long-term pricing function is weakened. This has a clear crowding-out effect on the market ecosystem and the capital that truly practices value investing and does industrial research.”

What impact does quantitative trading have?

Not only has the activity of speculative capital declined. Recently, some investors have also fed back to reporters that as the share of quant trading keeps rising, they sometimes feel at a loss in day-to-day trading. “For example, when you see opportunities on the board, sometimes it feels like you can buy, but the moment you buy, it gets smashed down. But when you need to cut losses, it may well be exactly the buy point of quant.”

Recently, the veteran investor “Gushiqi Liushahua” has, due to admitting that he can’t fight quant and has no choice but to concede, seen his web articles such as “The Surrender Letter from Human Traders to Quantitative Trading” widely circulated among people.

Some people believe that ordinary retail investors fundamentally can’t compete with quant algorithms in trading speed, information processing, and emotion control. This has seriously affected fairness in the market.

In the view of Li Chao (a pseudonym), a fund manager at a private fund in Shanghai, quant can capture every profitable opportunity. Anything retail investors can think of, quant will always think of one step ahead and place the order first, forcing retail investors to buy at higher prices. In addition, quant also makes declines happen faster and more violently, because when computers trigger stop-losses they do so very decisively, leaving retail investors with no chance to cut losses.

In interviews, some professionals at institutions also felt the impact of quant firsthand. Shu Qiquan told reporters bluntly: “Many investors now feel that trading is hard to do, and that is indeed a major pain point in today’s market, and it is directly related to the surge of quant. But the problem is not that ‘quant makes value judgments fail,’ rather it is that quant precisely penetrates the human trading rhythm.

“Now you look at chemicals, look at gold, look at geopolitics—everything seems logically clear and valuations reasonable. But once you enter, you get hit with a ‘sell-off’; just when you can’t stand the loss and cut losses, the stock price turns around into a V-shaped reversal. This is not because you misjudged—it’s because quant algorithms are precisely harvesting ‘human stop-loss orders.’ Quant doesn’t care whether fundamentals are good or bad; it only captures the micro-level order-book placement structure. When the market forms a consensus expectation, and stop-loss chips from retail investors accumulate beneath, quant can instantly break key support levels, triggering panic sell orders across the whole market—then it absorbs shares at low prices and quickly fills back. The very second you cut your loss is exactly the best buy point for quant’s building a position. So it’s not that value judgment has failed; rather, your long logic is being ignored in the face of quant’s short-cycle window. Quant dominates the market’s ‘micro price-discovery power,’ turning what used to be a T+1 ecosystem into a millisecond-level game.”

Regarding the impact of quant on the market’s “pricing power,” Li Chao also shared his observations: “Quant will capture other institutions’ buying actions—for example, as soon as I place an order to buy a stock, quant will buy in large volume, forcing the cost of my purchase to rise, otherwise you won’t get to buy. This is especially more obvious in small-cap stocks.”

As for the “sense of deprivation” felt by some investors under the prevalence of quant, some industry insiders believe that the basic logic of quant is to profit from market volatility—put differently, the money quant makes is the money others lose.

“It’s like gold in a pit is limited. The more quant picks up, the less is left naturally for speculative capital and retail investors.”

In fact, the A-share market’s high volatility and unique liquidity advantage are precisely what some quant institutions value. In late October last year, the founder of a domestic billion-scale quant private fund candidly said at an asset allocation forum: “The history of financial markets in Europe and the U.S. is longer than ours. If you open up the U.S. market, or the market of Hong Kong, you can actually see a situation where a large number of tail-end stocks basically have no trading volume. But in China’s A-share market, things are particularly special: out of 5,000 stocks, all of them have trading volume—which gives us a truly unique quantitative trading environment.”

“Resonance rather than confrontation”

Speaking about the recently popular “quant surrender” theory, Li Chao believes quant’s continued expansion will naturally affect other strategies, including discretionary long-only. He said: “Now quant’s share of the market is already not low; it will be even higher in the future. Because a profitable product will certainly attract more people to buy. In the end, what defeats quant is not other discretionary long-only institutions, but quant itself. Right now, the total scale of quant is not large—about 3 trillion yuan. If in the future the total scale reaches 10 trillion yuan, the situation will be different.”

In his view, discretionary long-only will likely continue to shrink in the future, because the total market share is limited, and quant growth will cause other strategies to wither.

Given this situation, Shu Qiquan believes that surrender is useless and only adjusting strategies will help. His suggested measures include: first, avoid crowded ranges—don’t chase highs or buy bottoms in ‘hot moments’ when sentiment is unified, leaving quant room where it has no incentive to profit. Second, change trading habits—reduce trading frequency, pay less attention to intraday fluctuations, and use medium- to long-term logic to fight against quant’s short-term stripping. Third, identify quant traces—learn to read unusual order-book movements and understand the quant accumulation characteristics behind the ‘sell-off V-reversal’; at that time, not only should you not cut losses, but you can even treat it as an opportunity.

“Markets haven’t changed; only the counterparty has. In the quant era, discretionary trading is no longer about speed—it’s about endurance, about logic, and about understanding human nature. He also said, ‘Quant’s advantages are speed, discipline, and breadth; its blind spots are depth of logic, industrial understanding, judging expectation gaps, and handling extreme sentiment. A truly discretionary player won’t write a surrender letter—they will evolve proactively: give up the high-frequency game of racing quant on hand speed, shift to swing trades driven by logic; use quant behavior in reverse rather than directly hard-fighting; deeply cultivate areas where quant coverage is insufficient, such as newly listed stocks, restructurings, and niche themes; and seize opportunities led by human nature and logic, such as policy turning points and industry trends.’”

It’s worth noting that the “quick eyes and quick hands” of quant are not infallible either. In some extreme cases, it can expose significant risks. The small-cap liquidity crisis triggered in early 2024 by concentrated orders hitting through Snowball products is still fresh in people’s minds. Recently, risk warnings issued by well-known market figures such as Dan Bian from East Harbour have also been a wake-up call regarding quant funds.

However, for some remarks that quant “only has negative effects,” some industry insiders hold a more reserved stance as well. Shu Qiquan stated: “I don’t think quant should be rejected outright. Quant provides continuous liquidity, and at many moments it absorbs sell pressure. It replaces emotions with discipline, and objectively reduces some irrational speculation. The real problem is not quant itself, but the fact that its scale is too large, strategies become too homogeneous, and regulation and risk control can’t keep up. Once everyone’s models converge and behaviors converge, and once an extreme market comes, it’s easy to have a resonance like ‘everyone cancels orders together, and everyone smashes the market together,’ which will intensify systemic volatility. From the standpoint of a discretionary trader, my conclusion is very clear: quant is not the enemy of the market, but with the current scale and pattern, it is indeed distorting price discovery and harming the long-term investment ecosystem. To develop a healthy market, it’s not about eliminating quant; it’s about constraining high-frequency internal competition, encouraging long-term holdings, and strengthening penetrative regulation so the market returns to the track of value and trading balance.”

He said that speculative capital has not disappeared—it has just shifted from pure emotion-driven speculation to logic + main themes + momentum leading-stock group formations, forming resonance with quant rather than confrontation. “To summarize, the market is not quant’s solo show—it’s a co-existence of humans and machines, and an ecosystem upgrade. The core of discretionary trading is not to fight quant, but to take advantage of what it can do and avoid what it can’t—doing what machines can’t. By sticking to deep research, emotion sensing, and logic-based pricing, discretionary players still have irreplaceable survival space and an edge in profitability.”

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