Algorithmic Trading - The Future of Investing

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• Algorithmic Trading - The Future of Investing
• Trading is one of the most favoured methods to
  secure finances and to earn more money across the
  globe. Though the risk factor is high, with the
  little study of the market situation, it becomes
  easy to overcome the risk. Earlier, the process
  of trading was manual. Buying, selling, even the
  calculation of risk, was done manually. From the
  late 90s, to overcome human errors and to reduce
  costs digital trading came into play. Hence
  called Automated Trading. Although the use of
  computers was restricted only up to perform
  actions as per the commands, it was not suitable
  for risk management. To manage the risk,
  algorithms (set of rules for problem-solving
  operation) were introduced in computer
  programming. Also, algorithms were used to
  buy/sell assets at the right time, price and
  quantity. The process is called Algorithmic
  Trading. It is the upgraded and more accurate
  version of Automated Trading. Industry reports
  suggest algorithmic trading market size is
  expected to grow from
• 11.1 billion to 18.8 billion, globally by 2024.
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• Advantages of Algorithmic Trading
• Eliminates Human Error- Due to fatigue and
  stress, errors are commonplace leading to
  operational risk. Also, side-lining emotional
  aspects and focus on rational and unbiased trades
  is important for risk management. Introducing
  algorithms to automated systems eliminates the
  errors.
• Accuracy- Shreds of evidence show algorithmic
  techniques are always more accurate than human
  decision making. Hence, more reliable.
• Cuts Transaction costs- As systems don't require
  continuous monitoring, it needs fewer human
  resources. Eventually, results in decreased
  transaction cost and an increase in profit.
• Back test- Back testing is the process of testing
  a developed strategy on previous stock market
  deals/situations. It gives validation to the
  strategy.
• Applications of Algo Trading
• Many forms of trading and investment activities
  use algorithmic trading to get maximum benefits.
  Programmers have developed algorithm trading
  strategies. Following are the applications of
  Algo trading
• Long term trading- Investors who prefer
  large-volume investments or invest for a longer
  time, use algorithmic trading strategies to earn
  more yield. They use algorithm-based strategies
  to mark the arbitrary rise and low period in the
  market, to break the large volume of shares into
  smaller ones and release them into the market as
  per algorithm outputs. Also, they use algorithms
  to schedule their involvement in the market.
• Short term trading- Intraday trading falls under
  the category of short-term investments.
  Investors buy and sell assets on the same day.
  The prime objective of Intraday trading is to
  earn profit by following and using market trends
  at the accurate time. Traders need to develop,
  use the appropriate strategies, Intraday trading
  strategies to earn benefits as the probability
  of risk is more. Bull flag trading strategy,
  Reversal trading strategy, Trend-based strategy,
  Pullback trading strategy are some effective
  Intraday trading strategies.
• Systematic trading- Traders, who generally invest
  systematically, i.e. without taking a huge risk,
  follow the trends strictly, practices algorithmic
  trading. They find it much efficient than other
  techniques to calculate the risk.

1 https//m.economictimes.com/markets/stocks/news/
will-the-rapid-rise-in-algo-trading-leave-traditio
nal- traders-behind/articleshow/70616353.cms
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• Algorithmic trading serving all kind of traders
  by providing accuracy in outputs.
• Requirements of Algo trading
• Knowledge of computer programming and algorithms
  to program for the developed strategy.
• Trading facilities
• Access to the market data to develop algorithms.
• All the required provision for back testing.
• Trader, investor, programmer, anyone who fulfils
  above requirements can go for Algo Trading.
• There are multiple Intraday trading strategies
  are available but algorithms trading gives the
  most suitable strategy to implement. These
  strategies are first backtested and then should
  be executed.
• Considering the above-mentioned benefits of usage
  of automated systems enriched with algorithms,
  the future of trading will be much more exciting
  and secure.
• No human intervention will be there, as the bots
  will be performing all the necessary operations.
  Chances of errors while predicting and or actual
  dealing will be very less.
• Using algorithms combined with AI, will give more
  accurate results.
• Algos can be programmed directly into the chips
  of bots for better communication.
• Using backtested archived data, multiple trading
  accounts and strategies will be managed
  effortlessly.
• The market crash will be the past as automated
  algorithm systems will be efficiently and more
  accurately predict future trends.
• Many more exciting developments will be there in
  future as the bots will be taking charge.

• References
• https//finance.zacks.com/advantages-investing-sto
  ck-market-2054.html
• https//www.investopedia.com/articles/active-tradi
  ng/101014/basics-algorithmic-trading-
  concepts-and-examples.asp
• https//cointelegraph.com/explained/algorithmic-tr
  ading-strategies-explained
• https//blog.quantinsti.com/algorithmic-trading-st
  rategies/
• https//www.adigitalblogger.com/algo-trading/algo-
  trading-strategies/ https//kuants.in
• https//www.algotrader.com https//www.cryptohopp
  er.com
• https//economictimes.indiatimes.com/definition/al
  gorithm-trading
• https//www.5paisa.com/landing/algo-trading
• https//towardsdatascience.com/algo-trading-101-fo
  r-dummies-like-me-b3938725d184