What is Algo Trading
Algo trading is also known as Algorithmic trading, is the process of using automated pre-programmed trading instructions to execute trading orders at high speed in the financial market in order to generate profits at a higher speed than that of human trader.
A computer program is a set of instructions, used by investors and traders in algo trading based on time, volume, and price. Once the set instructions are triggered in the financial market, the trading software executes the orders set by the trader. Generally, algo trading is used by Mutual Funds, Insurance Companies, Banks, etc., to execute a greater number of trades that are otherwise impossible for humans to undertake.
Advantages of Algo Trading
Following are the benefits provided by the Algo trading
• Instant execution of orders at accurate prices
• No human intervention means no human errors
• Back Testing your trading strategy on historical data
• No place for human emotions and psychological errors.
There are number of algo trading strategies used by many traders and investors. Some common types of algo strategies are given below-
1. Trend Following strategy – This is one of the oldest and widely used trading strategy, by this algo strategy you can find the market trend in the stocks by using various technical indicators like Moving Average, RSI, MACD, etc. These trades use technical analysis and market pattern indicators to make decisions to give a buy or sell signal, the algo immediately places the orders and follows the potential trend.
2. Mean Reversion strategy- This strategy is used in such a situation when the stock prices revert back to the mean value after a period of time when they become either oversold or overbought. So, by using this algo strategy algo places a buy order when the stocks hit an unusually low-price level and place a sell order when the stock hits an unusually high price assuming that the stock will revert back to the long time, average price.
3. Statistical arbitrage strategy- Statistical arbitrage systems refer to a group of quantitatively driven trading strategies that utilize mean reversion analyses to invest in diversifying the portfolio up to thousands of securities in in order to earn higher profit than usual profits.
Best Stock Brokers for Algo Trading
Here we have mentioned some stock brokers which gives you the excellent algo trading experience.
1.Zerodha- Zerodha provides free API key for algo trading and brokerage charges is 20 Rs/Order.
2.Alice Blue- Alice Blue is one of the largest stock brokers, provides you the best system to do algo trading. there is also no charge for account opening and API is also free and brokerage is also 15 Rs/Order.
3.Upstox- Upstox also provide API at different prices you can take API subscription at different prices https://upstox.com/developer/api-pricing/ .
4.Angel One- Angel One provides free API for trading through smart API platform, also there is no account opening charges.
5.Stoxkart- One of the fastest-growing stock brokers provides you the free API for algo trading and account opening is also free and brokerage is also 15 Rs/Order.
Also Read: Algo Trading API Bridging Software
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