All You Need to Know About Automated Trading Strategies

pooja rajput's picture
Automated Trading

Algorithmic trading strategies might sound interesting or too complicated. However, its concept is easy to understand, once the basics are clear. Here, you will get complete details about algorithmic trading and trading strategies that will assist you in understanding its basics.

What is Algorithmic Trading?

Algorithmic trading (also known as algo-trading, high-frequency trading, automated trading or black-box trading) is a technique that uses a computer program with the aim to automate the process of buying and selling stock.

In basics, it is a piece of code that follows a set of operations that are executed automatically. These operations are based on the inputs that you have programmed into it, and these inputs can be price, volume, time, economic data, and indicator readings. Once these criteria are fulfilled, buying or selling can be executed.

How does it work?

In general, it is a three-step process, which includes:

  • Having an idea about trading
  • Converting such idea into a strategy
  • Using an algorithm, the strategy is converted

 Users of Automated Trading

Here, any experienced trader with coding skills can use algorithmic trading strategies. They can create their own code and do more than just to open buy and sell orders. Algorithmic, in general, can be used for complex things like:

  • To produce complex mathematical calculations
  • Risk management
  • General trading signals
  • Forecast market movements
  • And more!

Some of the most proficient traders are big institutions and smart money. Hedge funds, pension funds, prop traders, investment banks, and proprietary trading firms are the users who use algorithms for market making.

Algorithmic trading strategies: Introduction

Some of the strategies are used to generate profits, whereas others are used for order filling. Order filling algorithms are used to execute large number of stock shares or future contracts. They can be performed to break a large-sized order into smaller pieces. Some of the popular algorithmic orders and techniques used by smart money are:

  • Icebergs
  • VWAP
  • Time Slice
  • PEG/BBBO

If you understand the impact of a big-size order, you know that if the entire street is aware of your intentions, you will not get the desired price. Likewise, if you want to buy a stock, the entire street jump into it and the price of the stock will automatically increase.

Best Algorithmic Trading Strategies

There are plenty of algorithmic trading strategies to select from. Here is a board list so you can check out big trends:

  • Momentum strategies
  • Sentiment based strategies
  • Mean reversion strategies
  • Statistical arbitrage strategies
  • Market making strategies

Developing the right strategy takes time, but it provides complete peace of mind. This is a very competitive space that needs having good knowledge and programming skills in order to develop high-frequency trading algorithms.

Today, there are a number of professional experts available to assist you to make your automated trading risk-free. By taking the help of the internet, you can easily find out the best service provider and start trading. However, the process of trading is quite easy and simple:

Pick a Trading System: Right from the Swing Trader, the Wave Trader, S&P Crusher to Pro Trader, you have several options available to select from.

Choose a Broker: After selecting the system and how much you prefer to trade, you will get a license agreement electronically. Also, you will be provided with details on various brokers that support algorithms.

Start Trading: After selecting a broker, you can start trading by following along in real-time on your Smart Phone. Also, you will get a daily statement from your broker.

Sounds easy and interesting? Get in touch with the right provider and start automated trading without any hassle.