What is Algorithmic Trading?
Algorithmic trading is a set of defined instructions aimed to carry out a task. A human trader cannot handle such enormous data and that is when you need a patterned algorithm. Algorithms have gained immense popularity in recent years and big clients demand it. These algorithms use mathematics and analyze every trade in the stock market and identify liquidity opportunities.
Algorithmic trading is useful for the traders as it reduces the transaction cost and investment managers can control their own trading process. In Algorithmic trading, there are different techniques to reap benefits like Simple Moving Average and Momentum Based Technique. Algorithmic trading is the process of using a computer program to follow a defined set of instructions for placing an order to generate maximum profits. A trader needs to identify an opportunity to which is profitable. Apart from profit opportunities for the trader, algorithmic trading makes more liquid and makes trading more organized. Many traders use MACD, Bollinger Bands and Relative Strength Index (RSI) to shoot up their profits.
What are the best software for algorithmic trading?
In India, Zerodha Streak, Omnesys NEST, ODIN and AngoNomics are some of the best algo trading software. This software has powerful features such as multi-asset trading, liquidity venues and it ensures the safety and soundness of our financial system. It analyzes end-to-end automated Trading lifecycles including market data, risk management, and order routing.
Although Algorithmic trading has multiple benefits, everything has its risks and challenges. System failure, network connectivity and most importantly imperfect algorithms.