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# Algorithmic Trading ## Algorithmic Trading - Also known as "Algo Trading" or "Black-Box Trading" - It uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. - Trade can generate profits at a speed and frequency that is impossible for a human trader. -...

# Algorithmic Trading ## Algorithmic Trading - Also known as "Algo Trading" or "Black-Box Trading" - It uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. - Trade can generate profits at a speed and frequency that is impossible for a human trader. - It is used by pension funds, mutual funds, and other institutional traders, to execute large orders. - It is also used by high-frequency traders (HFT), engaging with high-speed, high-turnover strategies. ### How Algorithmic Trading Works? 1. Frame work 2. Strategize 3. Code 4. Back Test 5. Deploy & Monitor ### Types of Algorithmic Trading Strategies * Trend Following Strategies * Arbitrage Opportunities * Index Fund Rebalancing * Mathematical Model-Based Strategies ### Advantages 1. Trades at the best possible prices 2. Reduced emotional influence in trading 3. Simultaneous back-testing 4. Reduced transaction costs. ### Disadvantages 1. System Breakdown/Error 2. Requires continuous monitoring 3. Unexpected outcomes 4. Over-optimization