Algorithmic Trading

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• Algorithmic Trading
• Technology has changed the way of our work. The
  financial markets are also not untouched by
  technology. At present, 30-50 of traders in
  India are using Algorithmic Trading, and 75 of
  traders globally. As we all know, Trading is the
  buying or selling of securities in financial
  markets. Algorithmic Trading has introduced
  mathematical algorithms into Trading and make
  Trading technological. Algo Trading involves
  building and implementing trading strategies.
• What is Algorithmic Trading?
• Algorithmic Trading is the most advanced form of
  Trading and highly technology-driven. It is the
  process of converting a trading strategy into an
  algorithm using computer codes. Computers execute
  the trade based on these algorithms. It has the
  advantage of speed and data processing over human
  traders. The other term used for algorithmic
  Trading is Algo Trading.
• Algo Trading works on the pre-programmed
  automated instructions (an algorithm) for
  Trading. It is a computer program - step-by-step
  instructions to complete a trading task to
  achieve a particular outcome like increasing
  profitability, better execution, etc.
• Who can take advantage of Algo trading?
  Experienced and professional traders, people who
  want to automate their trading strategies,
  Technical analysts who wish to automate their
  Trading, Jobbers who want auto-execution of
  trades, Wealth managers on behalf of their
  clients.
• Automated Trading and algorithmic Trading are
  used interchangeably mostly. But these two are
  different terms. Algo Trading is the process of
  converting a trading strategy into a
  computer-based algorithm to execute the trade.
  The strategy can be implemented in an automated
  mode. While Automated Trading is the complete
  automation of the trading process.
• The Automated Trading algorithms are based on the
  markets and the objectives of the trader. It
  facilitates quick profits in Trading in such a
  frequency that it is impossible for a human
  being. The price quote changes multiple times
  within a second. With the help of the algorithmic
  Trading, trades take place within the fractions
  of the seconds without human intervention.
• How Does It Work?
• It is a challenge to transform the trading
  strategy into an algorithm using a computer
  program to execute Trading. Highly skilled
  quantitative experts, researchers, and developers
  with a tech-focused approach are required to
  develop algorithmic trading software and make it
  more approachable. It must be easy to use. It is
  the final component of algorithmic Trading.
• The primary technical necessities for algorithmic
  Trading are
• Computer-programming familiarity or Ready-To-Use
  trading software to do your Trading
• Setting up an algorithm requires some technical
  knowledge. You can buy algorithmic trading
  software or build it. You may have the technical
  ability to program the trading strategy, or you
  can hire programmers, or use Ready-to-use
  trading software. Take good care while choosing
  software for algo trading. You can suffer hefty
  losses in financial markets with faulty software.
• Access to trading platforms and network
  connectivity with good strength

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• You should have access to prominent trading
  platforms and reliable network connectivity to
  execute trades. Trading platforms should be
  famous, which provides live streaming quotes,
  research calls, integrated fund transfer
  systems, etc.
• Access to market data feeds
• The algorithm monitors the market data feeds in
  search of opportunities to execute trades. Market
  data feeds allow traders to know the latest
  price for financial instruments.
• Infrastructure to backtest the algorithmic
  system
• You have built the algorithm as per your trading
  strategy. Now you need to backtest it before
  making it live on real markets. You should have
  the infrastructure and ability to check the
  efficiency of the system.
• Historical data for backtesting
• The availability of historical data depends on
  the intricacy of the algorithm, i.e. the rules
  and instructions implemented in the program.
• Algo trading involves the formation of predefined
  algorithms (set of instruction) based on Algo
  Trading strategies so that the computers can
  execute the trade on its own, based on strategy.
  These smart algorithms are a bundle of
  backtested trading strategies. Backtested
  strategies are tested and evaluated on
  historical data. It helps to maximise profits.
• The Core
• The algorithms are designed that can be
  compatible with the strategy chosen by the
  trader. The traders can choose different
  strategy at a different point in time depending
  upon the market conditions and other factors.
• Strategies are essential in determining the
  efficiency and profits that can be obtained from
  algo trading. Although the algorithm is placing
  the orders, it is the trader who develops the
  strategies to define how the Trading will occur.
  The traders decide what they want the computer to
  do, at what volume, at what price, at what time.
• Let the machine evaluate the trading
  opportunities for you and suggest a trading
  decision with maximum profits.