Chaos in the markets is surfacing due to the most recent paper released by SEBI. It focuses on the problems that are more likely to be coming into existence due to unhealthy and luring stock market prepositions proposed by unregulated platforms.
Trading is a business of risk, and nobody alone can predict the outcomes of the market precisely. But this possibility of earning loads with the help of the stock market is blinding people and therefore they are falling prey to some nasty games played by people of promising them guaranteed returns.
Over the years, there is a rise witnessed in the Algo Trading platforms, gaining a firm prominence in trading markets. Algo trading helps in substituting the client’s strategic planning with code-based planning which helps in streamlining the process. Whereas Algo Trading can indeed be a game-changer and help you set your feet well in the market, but promising returns on the purchase of orders are definitely too good to be true. And if anyone is assuring you with such offers then you definitely need to reconsider the whereabouts of the offer and the service provider.
While it seems trustworthy to the audience because most of them shall feel the need to earn easy money with the Algo Trading and until they realize it will be too late and they shall have lost enough savings. Therefore we at AlgoAchievers realized the need to make people aware of the trading and the Algorithmic concept about it. Because we believe people are not informed enough and this is causing issues.
What is Algorithmic Trading?
This term refers to the trading accompanied by the intelligence of bots. The strategies applied by Algo Trading are the processes and the instructions picked by the robots over the years. The software is designed to pick the market trends, keenly analyze the processes and patterns a give an output that is most expected and suitable. However, it can’t still provide precious results for obvious reasons. It also can trade automatically depending upon the market trends, if the options are selected to do so.
Consider an example, to understand the process better, If you wish to purchase a trade and sell it and trade over the period for certain days depending upon the market trends so that you are very less likely to face any losses, but doing it manually would be like referring to the P&L of this strategy and then look for all the possibilities and then finally conclude, which is very tedious job do, which would almost be impossible for the trader.
Now while if you want to apply a similar concept using an Algo Trading platform, most of your manual job is done by the software that is designed to do so. Even a non-programmer can be doing this by using very little knowledge about coding. The Algo can then analyze through various platforms automatically.
They could also monitor the markets live. And you can also design the software to provide auto signals to when buy and sell the shares with the help of market analytics. And it is also possible for you to automate the process completely.
Brokers and Algo’s:
The Algo trading offered by the broker and the system that monitors all your trades are all looked up by the broker. He is the strategist. The broker can offer leverage to his customers to completely trade on their terms and understanding with the offered output by the Algo software, but the customer also has a choice of providing complete ownership to the broker over his trading systems. In such cases, the Algo shall be operated by the brokers’ system and not by the customer. And the signals will be provided on regular basis to the customer updating him about the progress. The signals sent are completely automated and free from the intervention of humans.
There are sometimes strategies that are very much sensitive to latency and cause trouble in the pace of the operating systems. A brokerage firm runs on those servers that have strategies hosted on their platforms. This happens with the help of the execution systems that are managed at the back-end.
Latency or delayed execution can also result in some consequences that are found to be causing severe problems to the overall execution of the software.
The speed of order execution needs to be as fast as possible to come to a tolerable level, still, the execution by the internet-based Algo Trading platforms results can be extremely slow and not match the pace of an HFT Trader.
However, it is also important to note that Algos offered by the brokers needs to have the appropriate approval. The very reason for this is because of the risks involved in the trading. Therefore one needs to be very much aware of the broker he/she is consulting and also who is responsible for the handling of their Algo Trading.
Well-informed traders are being able to take calculated risks and therefore can yield more reliable and precious results.
Unregulated platforms and Algo Trading:
There has been a significant spike in the platforms that offer Algo Trading, and that also has increased in intruders that do not play by the effective rules and hence create more chaos than good.
This is in conjunction with the platforms that even advertise unregulated platforms and make sure to lure the audiences with offers that cannot be denied, but you need to be aware of these factors.
These platforms don’t have any market risks. As mentioned earlier all orders generally go through similar risk management checks as manual orders, all the tools usually connected onto a broker’s internet-based trading platform. Other than these risks, there are some other risks involved which everyone needs to be aware of:
- Concentration risk: this type of risk arises when a large number of people subscribe to the same strategy and simultaneously if the strategy fires automated customer accounts in large numbers, this can result in potentially cause volatility in the markets, with low liquidity in contacts or stocks.
- Strategy misfiring: These are the some of the “off-the-shelf” programs offered by the 3rd party vendors. Due to its one-click financial return feature, it attracts many non-savvy users, who tend to subscribe to these offers. This is a black box, which means most of the users can’t even see what’s happening behind the scene. Such program can face many issues and technical gliches which can inturn cause in misfire of orders, huge lossex for the customer. As these platforms are not legally bond there can’t be no legal recourse either.
- Risks of Mis-selling: Sipke in Algo trading has also resulted in many platforms that provide unregulated trading. They could show potential earning to blind their clients. These can cause a lot of issues to the Clients in the long run. If the trading platform your trader is using is not regulated it can affect your trades and also cause damage to your trading profile. Therefore it is very much important to be aware and not fall prey to luring offers provided by non-regulated brokers.
Is Algo trading really profitable?
Algo Trading can be a much better alternative for those who are beginners or wish to trade for the sake of exploration and also can be helpful day traders. Statistics state that 1 out of every 5-day trading earns profits and Algo trading there can definitely provide more insights and a clearer picture to dodge losses.
Is Algorithmic trading actually profitable?
As answered in the above question, yes Algo Trading can be profitable if used the right way, however, there is no type of trading known that doesn’t accompany risks.
What percentage of trading is Algorithmic in 2021?
Pacing technology is encountering some drastic changes in the markets, making trading more approachable was one of them and now the other one is making trading more accessible with the help of Algo Trading. Algo Trading accounts for over 60-70% of trading overall.
Is Algorithmic trading good or bad?
Now, this is a very broad question. Algo Trading is like a coin, it has both sides, good and bad, and completely upon how the user or the customers uses it. It is also very much necessary to know about your broker and the processes well before you start trading.
Is retail Algo-trading profitable?
It completely depends upon your Algorithm. If your Algorithm or trading helps you focus on the profits and is minimum latency and a well-set system then retail Algo Trading can be very profitable.
Is Algo-trading legit?
Algo Trading definitely has gained popularity over the ages and is ranked 54th rank in the listing of trading platforms.
How hard is it to write a trading Algorithm?
Designing an Algo trading platform is not hard or difficult. It requires an understanding of the markets and making the system work free from latency and with as much efficiency as possible. But you need to make sure you have a very profitable and dependable strategy to start with.
How much does Algo trading cost?
You can have as little as 10-12K to start with and invest with the brokers and learn Algo Trading. While his might not help you make huge profits but will surely take you far enough that you learn basic trading strategies, again only if you invest wisely.
How much money do Algo traders make?
The Algo Traders make from 20K dollars to 5 lakh dollars. It also depends on the trading capacity and precision of the trading strategies.
How much money is needed to be a full-time trader?
Do you leave your 9-5 job and start trading full time is one of the biggest questions every trader faces once his lifetime. Now while being a full-time trader can have advantages, but also has disadvantages too, one needs to have at least 25K dollars to become a full-time trader.
Can you buy a trading Algorithm?
Yes, indeed you can both buy or build an Algo trading platform with strategies inputting as per your requirement and market knowledge. However, it would be fair if you work on your knowledge and experience well enough before you dive into the market of Algo Trading.
How much does AlgoTrading101 cost?
The trading course offered by AlgoTrading101 which constitutes around 200 classes and is priced at 380 dollars for the basic course.
What companies use Algorithmic trading?
There are many companies that use Algo trading; a few prominent ones are listed, Open Futures, MyFinDoc, Kivi Capital, iRage Capital, Mansukh Securities, AlphaGrep, etc.
How is Algorithmic trading used?
A system made out of codes that analysis the markets and the trends in a fraction of seconds to give you give you the most optimum results. It is also important to note that one needs to have a strategy that is promising to set the Algo Trading right.
Is Algorithmic Trading 2021 Profitable?
Yes, with the advancement in trading technology and implementation of diverse strategies, Algo trading has become one of the most reliable and profitable platforms in trading.
Can an individual do Algo trading?
Yes indeed, if one has access to reliable strategy and knowledge in markets, with the ability to design basic coding, Algo Trading can be done by an individual also.
What do Algorithmic traders do?
A complex formula setup that has access to multiple layer data and a super-fast ability to scan through the data and provide desirable results is the activity carried out by Algo Trading. And traders create this software and make trading a much more accessible process.
How can I become an Algorithmic trader?
Becoming an Algo Trader is a process and can be learned through understanding various steps. If you wish to be an Algo Trader then you can reach us out through the contact details provided. If you wish to learn Algo Trading you can refer to other blogs from AlgoAchievers, we have covered the same in another article, comment down for the link.