Algorithmic Trading in India and the scope for retail investors

 

After making a lot of money for investors in the Western countries, automated trading came to India on April 3rd 2008, when the Securities & Exchange Board of India (SEBI), introduced algorithmic trading by allowing Direct Market Access facility to institutional clients. To put in simple terms, Digital Market Access (or DMA as it is usually referred to as) allows the brokers to provide their infrastructure to clients without them having to interrupt them in any way. At the time when algo trading strategies were introduced in the country, they were only allowed for institutional clients and not retail traders.

According to a report by Economic Times, the automated trading business is pegged to grow from $11.1 billion in 2019 to $18.8 billion in 2024 at a robust CAGR of 11.1%. The advent of automated trading in India that makes use of intraday trading strategies has marked the beginning of an era of growth and expansion for a lot of businesses. This is why there is a lot of incentive for retail traders to get into intraday trading strategies.

Why Should Retail Traders Do Algorithmic Trading?

Retail traders have been prohibited by the SEBI for a long time from entering into the business of automated trading but now that the opportunity has finally come knocking at the door, many have shown some serious interest towards it.

However, there are certain pre-requisites to entering the algo trading world, as retailers cannot think about becoming successful without having some prior knowledge about investment and algo trading. Since automated trading is done with the help of algorithms that are fed into software that studies the market, and gives trading indicators regarding buying and selling stocks. This way, the person does not have to do any thinking and thus, human errors like miscalculation and emotional bias are removed from the picture, which makes the process more efficient and makes trading more profitable.

There are a plethora of benefits that algorithmic trading brings to the retailers. Given below are some of the most significant ones.

·        Since the computer is handling the trades, the speed of execution of trade is very high.

·        The trading decisions are well informed and not based on gut feeling or hunches. Thus, the likelihood of you suffering any losses is minimized as well.

·        Your market reach is increased quite significantly.

·        Trading becomes more systematic.

·        You can kick back and relax instead of having to monitor then market constantly.

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