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Algorithmic trading

The algorithmic trading is computer codes that buy and sells when it sees the market is complying with its coding functions.

What is Algorithmic trading

Algorithmic trading is simple it is just like just we set up an alarm on a smartphone just like that an algorithmic trader(AT) will set some functions on price, time, volatility, etc. If any of these functions have met the market condition then the buying and selling of stocks will take place.
for example, I set three programmes that I will buy a TATA motor if the price is at 100 rs per share on market timing and when delivery of stocks is 35%. So if price hit at 100 and delivery is 39% then the order will be rejected it will only be executed when all the programmes met the condition similarly for selling.
How much time does it take to execute an order, well a typical AT can trade at least 1 million transactions in a minute. So even if their margin is as low as 1 rs they can still make a fortune.

HISTORY  

It does not have a long history, It all began at NewYork stock exchange when they started providing the computerised trading system but it didn't get very famous because computers were not that fast that they will be able to read the market data at the right time, It started picking up from 1990 with the emergence of information and communication technology(ICT) computers were able to read market data and able to execute orders at the right time.
then the big players came, Merchant banks, Institutional investors and many more followed these institutions have made a fortune because they can employ coders, economists, brokers, etc but a normal person can not do that all by himself that is the reason why still most people in the market trade manually. But don't worry we at angel broking provide Robo order service.

Present

There are so many things that a programmer can programme so there is no single trading strategy it like whatever is working for a period of time it is good.
this type of trading is not the end of the market Jim Simmons has revolutionised the market by introducing quants to the stock market in the next article I will cover about quants trading and investing. Why institutional investors have switched to quants because prog trading is similar to manual trading with more computers and the internet, That's the reason why many mutual funds fail to give return because they haven't been able to switch to quants and algo trading is obsolete for institutional investors like mutual funds and hedge funds.

Threat

This type of trading is also a risk to the financial system as a whole.
there are dozens of examples of the flash crash in the global financial market but I will pick the most severe among them that is US flash crash of 6 May 2010.

Facebook was launching an IPO at the stock exchange and they have chosen knights securities for listing process, Knights securities had 8 servers and they had commanded them to purchase the facebook stocks, 7 servers setting has been done successfully but one server had a technical issue and it started buying all the stocks of the previous programme setting it started inflating the market and then all the other servers picked its trail and they also started buying inflated stocks and all the other servers all of the broking houses started buying, suddenly everyone was buying inflated stocks and no one was subscribing facebook IPO when knights securities found out that it emerged from them they shut down their system and Stock exchange did the same.
This is one of the reasons why institutional investors are switching to quants.

 for further enquiry call 8595864379 for trade and investment purpose.

thank you for reading.


 

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