algorithmic trading

Algorithmic trading is defined as buying and selling of stocks through a computer program in an automated manner. No manual user interference is required . Each algorithm can be said to be like an aggressive mutual fund. Start it and sit back.

In India, algorithmic trading was legalised or you can say brought in 2009. And as soon as it was done, banks and corporate houses established their technology to use this latest weapon. And as the result of which, the % of trades placed by algorithms in India increased. An NIFM report states that till 2015, over 42% of all trades were placed in an automated manner in the Indian Stock Markets. And it is expected that by 2020, more that 80% of all the trades will be done through such systems.

Now, since technology infrastructure is required for algorithmic trading, which also comes at a high setup costs, the retail traders couldnt adopt it. In recent times, the “Securities and Exchange Board of India” did made a few things cheaper but still the retail traders have little idea on how to pursue it. Steps like making the racks cheaper do come with a positive state of approach but a lot more needs to be done to ensure that a retail user is well able to follow the trading method and is able to enter in a hassle-free manner.

Each and every algorithmic trading system has the particular set of fixed components which can be found in this blog post which in itself is a difficult task to create and setup. It can take starting from INR 20,000 to INR 80,000 annually to setup a working system with multiple dependencies on it. After which programming expertise is required so that you can integrate the setup and create an algorithm. A time taking iterative process is backtesting and creating an algorithm. It can never be created in a day or two. It takes time to develop, conform to various risk management systems and then live trade.

The development aspect of an algorithm can be well aided through Kuants .It provides a ready made platform to develop and test different algorithms for free.

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