Algo Trading Strategies

Automated trading, also referred to as algo trading, utilizes computer algorithms to make trades. Since the computers are much faster, precise and emotionally unbiased, they can really help increase the efficiency of trades. In fact, algo trading strategies have become so popular that almost 40% of all trades conducted on the National Stock Exchange (NSE) are done by using automated trading. Let us take a look at some of the advantages of algo trading that makes this method of conducting trades so popular.   Advantages of Algo Trading: To answer the question of whether or not algo trading is right for you and whether or not you should conduct intraday trading with the help of computers, we need to assess the pros and cons of the method in question. There are undeniably some cons related to algo trading but they are massively over weighed by the pros, which include:   Speed One of the best advantages of automated trading is that since the algorithms are already dec...

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 T rading. 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 bi...

In the world of intraday trading, Algo trading strategies are fast replacing the manual trading strategies amd are becoming popular day by because of a plethora of advantages that they bring to the table. Algo trading strategies have existed in the market for more than three years now, but there is still a large number of traders and investors who are unaware about its advantages over manual trading. Let’s take a look at some of those advantages that are revolutionizing the world of automated trading.   The tendency to get fatigued Humans have a tendency to get fatigued, especially if they have to do a repetitive task. Because of this, no human, regardless of how great he is at his job, can ever deliver his 100% consistently. This is where computer programs emerge as a viable solution. Since programs aren’t capable of feeling fatigued and cannot get bored or disinterested, they can process more information in the same amount of time. This means more trading and more trading m...

Intraday trading, as the name suggests, refers to the process of buying and selling financial instruments on the same trading days – which, in effect, means that all the positions are closed before the market shuts down for the day. By making use of the intraday trading strategies, the investors or speculators, as they are called, are able to generate great profits. Algo trading strategies, on the other hand, make the process incredibly fast and much more result-oriented. Using algo trading strategies in tandem with intraday trading strategies, you can generate great profits with minimal risk. Given below are some of the most popularly used, foolproof intraday trading strategies that are used to optimize the algo trading process. Momentum and Trend Based Strategy : This is, perhaps, one of the simplest and most straightforward ways of conducting trades in the market. You are not required to make any complex predictions. All you have to do is to follow the market trends and your ...

Intraday trading, as the name pretty much suggests, relates to the buying and selling of stocks on the same day, during obviously the predefined trading hours by relative authorities. The idea here is to buy and sell stocks within the duration of the same working day in order to generate profits – as much as possible.  Such is the nature of the stock market that the stock prices of different companies keep fluctuating every day. A person who employs intraday trading strategies seeks to benefit from this rise and fall of stock prices. Buy buying the stocks when they are cheap and selling them when they are costly, one can generate serious profits. Of course, there is a risk factor associated with the process and this is why one should be careful and probably seek help from a company that specialises in the broking field and have an automated trading system set up, that helps minimize the risk factor. Automated trading systems allow the traders to set up specific rules for both t...

Introduction The stock market is always buzzing with activity. Trading is all about a keen eye for the ups and downs of the market. Investing in stocks requires knowledge, speed, and flexibility, among several different things.  There are new methods to achieve more profit from the stock market, such as Algo Trading. The basis of Algo trading is cashing on the hidden and quickly emerging patterns in trading which human being can miss. Machines can be programmed to read previous designs and read quickly emerging ones, thus bringing out the opportunities to trade profitably. One of the reasons as well for its emerging popularity can be that earning is much more through algo trading than trading manually. Before jumping into the question of ‘Is Algo Trading right for you?’ it is necessary to understand the basics. We’ll cover a few terminologies here and then go further to answer the question. Algorithm Trading: Let’s start with understanding the term- Algo Trading. Algo i...

There can be a plethora of questions in a person’s mind when he/she is opting to optimize their investing game by employing algo trading strategies. One of the most common and sensible question that arises in a person’s mind is this: is algo trading legal? Would I be liable to legal ramifications if I indulge in algo trading? Would I end up losing my money? To be honest, these fears are well founded, and any intelligent person who is entering a new domain should be worried about the safety of their assets. In this article below, we’ll try to settle these questions with appropriate answers and hopefully, make it easier for you to make a decision. Algo trading refers to using computer-based algorithms to make much more informed and less risky buying and selling decisions. Of course, the algorithms have to be written by humans and they need to be approved by a CA before they can be implemented in the software. Now to answer the question about the legality of automated trading, we need...

In the world of stock trading these days, algo trading is all the buzz. But before you decide whether or not you should dive headfirst into this novel concept and employ algo trading strategies to make the most of earning opportunities in the stock market, you should know how algo trading works. Algo trading is basically feeding algorithms to a computer as a finite set of instructions in order to obtain specific results. In algo trading, the computer can be programmed to execute orders based on the market signals. Since the computers are more apt at handling large quantities of data, they are able to evaluate market conditions more efficiently to decide how the buying and selling decisions should be made. In fact, algo trading is so effective that it has taken over 40% of all stock trades on the National Stock Exchange (NSE) in India. Let us take at how exactly algo trading strategies work: Formulating a strategy Much like manual trading, automated trading also relies on creating...

If you’re a stock market investor or are thinking about becoming one, this question must have crossed your mind: do algo trading strategies help generate profit? If yes, then to what extent? And most importantly, should you or should you not opt for automated trading? In the article below, we’ll try to answer these important questions. What you do when you employ algo trading strategies is that you have software where you enter certain algorithms to make trades. Those algorithms basically enable the computers to make decisions on their own in the best interest of the investor as per the prevailing market conditions. The most important benefits of automated training is that you get to do high-speed trading that is more accurate and less emotion-based – which could be a case if you’re doing manual trading. If humans are left in charge of trading, regardless of how good they are at understanding market behaviour – they are biased in certain biological ways that aren’t very useful. Fo...

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 1.        Pricing Strategies are more focused on the expected returns 2.        Mathematical model-based Strategies are developed purely based on mathematical calculations, models.  3.        Trend Based Strategies follow market trends. By using the statistics, patterns are studied, and further strategies are developed.  4.        Arbitrage strategies use algorithms to figure out price differences and trade according to opportunities for profit. 5.        VWAP (Volume Weighted Average Price) & stra...