Since the dawn of the decade, technology has been leaving an imprint on the trading world. The advancement resulted in the birth of most disruptive technology in the form of algorithmic trading. The algorithmic trading system has been in existence for decades under different names like black box trading. However, in the last few years, algorithmic trading has become a preferred option in trading.
History of algorithmic trading
The introduction of electronic execution and communication networks in the financial markets occurred in the late 90s. The first introduction was done in the New York Stock Exchange which changed the minimum tick size from 1/16 of a dollar to USD 0.01 per share. The introduction led to a great change in the microstructure of the trade, enhancing the market liquidity.
As the market liquidity increased, traders and brokers started using algorithmic trading to execute large orders aiming for a better average price. The execution of trades with speed and frequency led to a permanent introduction of algorithmic trading.
What is algorithmic trading?
Algorithmic trading or automated trading is the process of initiating a computer generated set of instructions to place a trade to make profits at a frequency that is not possible for human traders. The algo-trading makes markets more liquid and enables trading more systematically by ruling out any impact of human emotion on trading activities.
The concept of algorithmic trading can be easily explained with the given example:
As a trader, you can easily build a trading program and code it to trade the market based on certain criteria and rules that you believe can execute profitable trading.
We at Algotraders offer four different type of algo trading system:
- Algotraders 808
- Epsilon 9
- POI (Point of Interest)
- The BAT
Technical requirements of Algorithmic Trading
Before looking into the technical requirements for algo trading, it is necessary to understand that you must either have a sound experience in trading or you have a fund manager or broker to do the trading on your funds. The other main challenge is to transform an identified strategy into an algorithm that has access to trading accounts for placing an order. The following are the technical requirements needed to enable algorithmic trading:
- Availability of pre-made trading systems like Algotraders 808, or computer programming knowledge to program the trading strategy.
- Excellent network connectivity along with access to trading platforms to place an order.
- Direct access to market feeds and news, which will be monitored by the algorithm for probable opportunities to place order.
- Minimum support infrastructure that can run the systems for hours without any failure.
How Algo trading is better than traditional trading?
“Clients want efficiency and execution,” says Brian Pomraning, head of electronic client’s solution, JP Morgan in New York and that is where algo trading beats the traditional trading by a fair competition. The biggest advantage of algo trading is that it is free from manual errors and can handle a large volume of trades that cannot be done through traditional trading. The execution is speedy and with a much better frequency.
As a trader, you can depend upon the algorithms and create systems that designed as per your trading styles. Once the system executes the trades, it is free from all kind of emotions that often hampers a good trade or leads to a bad trade.
Why choose Algotraders for managing your funds?
We at Algotraders have developed algorithmic systems that are backed by cutting edge technologies and algorithms. The systems are pure representation of our experience and trading strategies that have made us profit while trading full time. Nearly 80% of our trades are executed through these systems. The biggest step that we have taken to ensure total transparency is to enable our users to see the trade live as well as observe the fund statics in real time.