Overview of Algorithmic Trading Strategies

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• Overview of Algorithmic Trading Strategies
• Strategies are a natural way to get the maximum
  benefit out of algorithmic Trading. Based on the
  duration of holding the investment, Algo Trading
  Strategies are classified as Long term and short-
  term strategies. Automated TradingTrading has
  been enhanced with specific rule-based decision
  making.
• Long Term Strategies
• Pricing Strategies are more focused on the
  expected returns
• Mathematical model-based Strategies are developed
  purely based on mathematical calculations,
  models.
• Trend Based Strategies follow market trends. By
  using the statistics, patterns are studied, and
  further strategies are developed.
• Arbitrage strategies use algorithms to figure out
  price differences and trade according to
  opportunities for profit.
• VWAP (Volume Weighted Average Price)
  strategies, break the large volume of stock into
  smaller and later issues them according to market
  conditions to earn more yield.
• Implementation shortfall strategy uses algorithms
  to target involvement in dealing when stock
  prices are high and vice versa.
• Short-Term Strategies
• Short term strategies are generally executed in
  Intraday Trading strategies, where assets are
  bought and sold on the same day. Here stocks are
  not purchased for investment purpose but to earn
  the profit by connecting with the stock market
  trend. Algo trading strategies are incorporated
  in Intraday Trading to reap more benefits.
  Following are the Intraday trading strategies
  using algorithmic TradingTrading
• Reversal trading strategies use algorithms to
  find out the highest and lowest points of the
  day. Based on these points as the secure time,
  price and quantity start reversing it gives
  alerts to either buy or sell the assets.
• Trend based strategies analyse the trends using
  Algorithms, and further strategy is developed.
• Bull flag trading strategy based on the highest
  peak and steady decrease in trend during the
• day. To get the target prices on the patterns of
  bull flag shape, algorithms are used. Based on
  these trends, ' strategies are developed.
• Pullback Trading Strategy develops the low-risk
  buying opportunity.
• Breakout trading strategy enables us to enter the
  market when prices change outside a specific
  range.
• 3 Efficient Intraday Trading Strategies Used in
  Algorithmic Trading
• Algo trading is an automated practical approach
  to TradingTrading. Strategies make the trading
  process very fast and much more result-oriented.
  The trades can be executed to the point of
  specified price and volume in minimal time. It
  reduces the losses due to the time lag between
  the sale and purchase of securities.

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• Momentum and Trend Based Strategy
• It is the most commonly used and most
  straightforward strategy. There are no complex
  interpretations or predictions to be made. It is
  the momentum and trend-based strategy. You need
  to follow the trends, and the energy in the
  market and the trades will be executed
  accordingly. Trade will be based on technical
  indicators - the moving averages, the price level
  movements, channel breakouts, etc. If a set of
  conditions is fulfilled, then automated trading
  is generated.
• Arbitrage Strategy
• When there is a difference in the cost of the
  securities on different stock exchanges,
  Arbitrage profits take place. The algorithm
  identifies the price difference immediately using
  the computers and executes a trade to enable
  buying on the low-priced exchange and sell on the
  high-priced exchange. Although the cost
  difference is not too much, here, we can compare
  the speed and accuracy of Algo trading and
  manual TradingTrading.
• This strategy is mostly applicable to forex
  trading. Once the trade gets executed, arbitrage
  profits will be credited to the trader.
• Weighted Average Price Strategy
• This is also one of the most popular and
  efficient strategies. The objective of this
  strategy is to quick-execute the order to the
  volume-weighted average price or the
  time-weighted average price. The orders are
  executed in small parts. The order is based at
  either volume-weighted average price or the
  time-weighted average price in specific opening
  price in defined time slots. The algorithms are
  successful in releasing the orders in small parts
  with efficiency and accuracy in nanoseconds,
  which may not be possible by human traders.
• To know more strategies, refer to our Algorithmic
  Trading Strategies - Part 1.