It is an abbreviation for algorithmic trading. In this case, it is a machine-driven trading service that may either recommend transactions based on its data or execute orders on your behalf without your involvement. It is readily available on the majority of financial exchanges.
Consider the following scenario: you have developed a trading strategy for the shares of a specific firm. If you want to sell Reliance Industries’ stock if its price falls below 3 percent and sell-side volumes surpass the 20-day moving average, consider the following scenario: the stock price of Reliance Industries falls below 3 percent, and sell-side volumes exceed the 20-day moving average.
You can place a ‘Limit’ order on your broker’s website or mobile app by entering the amount and price parameters in the appropriate areas on the broker’s website or mobile app. In contrast to the previous part, you will not be able to specify the volume requirement that we mentioned previously.
What is the best way to get started with algorithmic trading?
Like anything else in the financial and trading world, it is critical to understand that you should first receive proper training and understand how algorithms are developed and how they function across various trading platforms before beginning to trade.
However, if and when you decide to begin, you will require a program to guide you through the process. If you are a programmer, you could create your own version of this. Alternatively, you might use one of the off-the-shelf algorithms available from several algo trading india companies, giving backtesting data (past performance).
How big is algo trading in India?
Even though algorithmic trading is not a new concept, the recent explosion in the number of retail investors in India has given the country’s market regulator, the Securities and Exchange Board of India (SEBI), pause for thought. SEBI is concerned that retail investors could end up being the bag holders in various ways, one of which could be through algo trading.
Automated trading (also known as algorithmic trading) is widely utilized in developed markets, and it was first introduced in India in 2008. By 2012, automated trading systems (algos) were used by 50% of the traders in the United States. In the foreign exchange markets, algos account for approximately 80% of total trading volumes, according to the Financial Times.
“Derivative trading is where most algorithmic trading occurs, and the Indian derivative market is one of the most liquid in the world.” On average, API [application programming interface]-based trading accounts for around 25% of total trading volume at the retail level. “As of now, algo trading India accounts for approximately 10% of total trading, which would be the case by the first half of 2021. For the time being, algorithmic trading is permitted by the Securities and Exchange Board of India (SEBI), subject to certain requirements, including the adequacy of risk management systems and annual examinations of brokers’ systems by Certified Information System Auditors (CISA).