The recent buzz about algorithmic trading doesn’t seem to subside. Rather, the use of Algorithmic Trading App has been soaring in India. It has been observed that many people are learning new concepts and technology and using this revolutionary trading technique.
Though Algo trading is not something recent. This has been there for quite some time now. Countries like the U.K. and the U.S. have already been aggressive on Algo trading. Here, we will discuss all Algo trading and whether stocks can be traded through algo trading in India.
What Is Algorithmic Trading?
Before jumping on to the stock trading possibility in the Algo trading, let us first try to understand what algorithmic trading involves. Algo trading uses automated and coded computer programs to trade in the stock market. Unlike the conventional method of trading, which involved manual decisions and activity, Algo trading uses the computer system to perform all the key operations. Whether it is about making significant trading decisions or placing the final order, everything is done by the machine.
Algo trading requires good knowledge of code writing. So, it is imperative for the organization to the individual to develop a good understanding of computer programming languages.
The Start of Algo Trading in India
Though algorithmic trading has recently become popular because of its efficacy, high speed, ability to transact large amounts of data, etc, it began early in India. On 3rd April 2008, the Securities & Exchange Board of India introduced Algo trading. They permitted DMA or Direct Market Access facility to the clients. On April 29th, it became popular when international players used the DMA facility like UBS, Morgan Stanley, JP Morgan, etc. Foreign Institutional Investors were allowed to use DMA from February 2009.
SEBI Investment Advisors have 70 to 80% of market volume algo accounts internationally. They include a range of structures, regulations, and traders. Also, algos are only doing half of the volume in India and need more upheaval.
When Algorithmic trading started in India in 2008, there was the dominance of big financial institutions and brokers. With the development of digital discount brokers and API, now many traders have started accessing algorithms and looking forward to tapping the investment opportunities.
Algorithmic Trading Implementation
The trader uses a specific process to implement the system. To start with, a computer program is written using a programming language. One can use the languages like Java, Python, NodeJS, etc. it is important as the program needs the same for automation of all the trading activities.
The Algo traders can create a program that is responsible for buying a certain number of stocks the moment it touches the resistance level. It can also be used to sell when it reaches the resistance level. On the same lines, the program is integrated with their trading account. This creates seamless automation of placing orders through their trading account. The designed computer program does not need their intervention. The transactions are done without needing the trader to access the trading platform. But it is crucial to understand that the program integration with a trader’s trading account needs proper coding to avoid any errors and issues in Options Trading App.
Trading Stocks With Algorithmic Trading in India
There is no denying the fact that algorithmic trading has been transformative. Other than offering superior profit opportunities to the trader, it also makes the system more organized. There is no impact of human emotions and chances of manual errors on trading, augmenting the efficacy of the trading market.
Algo trading can be successfully implemented in India. One of the main reasons algorithmic trading might soon replace manual trading is its high speed, precision, and cost. Algos are adept in recognizing patterns and performing the trade within the least time and much faster than humans. Following the predefined instructions, the machine maintains accuracy and keeps controlling the orders without needing human intervention. This enhances time-saving and leads to lower transaction costs as well. Trading stocks through Algo trading means allowing the traders to make more informed decisions and analyze large data in less time.
You can begin with trading APIs, which is an interface that permits many computer programs to work with each other. The stock brokers issue the APIs and the traders can use the same to begin algorithmic trading in India. Using the APIs means you don’t need to make effort in coding and integrating the program with a trader’s account. Using the trading APIs, the trader can access live markets, view recent data feeds, manage trades automatically through their computer system, and also handle the account data.
Build Skills and Knowledge
Use your analytical skills to become a quant trader. Also, the core of algorithmic trading is algorithms, data, and mathematics. You need to hone your mathematical skills to understand statistics and calculus. Knowledge of a programming language like Python will also be advantageous and help you function independently.
While making a strategy, know your risks and rewards. Perform strategy back-testing. A good understanding of the financial markets is also important. The knowledge of quantitative trading and understanding the ways to handle large datasets, trading using different instruments, etc. is imperative. Enhance your domain knowledge. It is also essential to know about the specific norm regulations for Algo trading in India. Search the audit requirements, algo trade execution, commodity markets, and more.
Though the popularity of Algo trading is soaring, the fact that much more development is needed cannot be undermined. Still, in the beginning, stage, Algo trading needs more experimentation and testing. However, Algorithmic Trading Changing Trading Market In India 2023 is an undeniable fact. The traders have started making their own programs and have been achieving success.
The reasons for the popularity of Algo trading in India today has been the rise of electronic trading platforms and new technological innovations in the financial world. The traders in India now use algo-trading and reap the benefits of higher efficiency, fast trading, the lowest chances of errors, and tapping the market opportunities that were otherwise challenging to identify.