Algorithmic Trading System - How to Setup One for You

Algo Trading System and How it Works

Despite being introduced in India for almost a decade ago, Algo Trading feels new to many and rightly so because it is a complex and new concept. 

Around 15% of the trading in the cash market segment of India is through algo trading and if you are a Trader and unaware of it then this is the right place for you. 

Because, as any other technical advancement that happens in the 21st century, we are going to adopt algo trading either today or tomorrow. So, it is good to get familiar with the concept. 

We have had detailed discussions in our previous blogs explaining what is algo trading, how algo trading benefits a trader, does it really have a future, some myths associated with it and some most worked in algo trading strategies. 

Next up, here we are going to explain how an average Algo Trading System actually works. 

Algorithmic Trading or Algo Trading as you all know or may not know places trade for you when market trends/numbers reaches a certain kind of threshold you defined for it in your strategy (that turns into an algorithm). Sounds interesting right!  

Now let's look step by step on how it really works. We are not going to bore you with the technical details, just some important information that will clear the confusion (if any) and will help you choose algo trading more easily. 

Prerequisites for Algo Trading System 

So first thing first, there are some prerequisites to get started with algo trading and without them it is not possible to imagine how an Algo Trading System works, and these are: 

1. A Trading Strategy

This is the base of any trading whether manually or through algo — a trading strategy. 

You can either have your own trading strategy or a predefined and tested trading strategy, but the very first thing required for an algorithmic trading system is a trading strategy. 

We have listed some 14 tested and most worked in algo trading strategies here.

2. Algorithms 

After having a great trading strategy ready, you just need to convert that into algorithms. 

As everyone is not equipped with technical know-how of how to code, you can select an algo provider from the market like us (Smart Algo) to prepare an algorithm based on your preferred trading strategy without having to invest your time on learning how to code and actually coding it all.

3. Robust Infrastructure 

Besides these things the most important component is a working Infrastructure — Working Computer; High-speed Internet Connection; Servers, etc. 

These were some prerequisites that can make trading with the help of algorithms a smooth experience. 

Working of Algo Trading System 

Now that we have discussed all the details about the important prerequisites for setting up an algo trading system, let's get to the final part of it — how algo trading works. 

1. Development of Strategy 

The very first step to start algo trading is the same as manual mode of trading i.e. to select and formulate a strategy that can work, and make money for you. 

There are many types of Algo Trading Strategies that a trader can choose from like trend identification, scalping, stop loss modification, etc.

2. Algorithm Automation

After finalizing and formulating the strategy, the next step involves preparing an algorithm that complements the strategy and works exactly like the trader needs. 

And after the algorithm is formulated, it needs to be automated and the code needs to be back tested. 

3. Putting Together a Charting Software and Data Feed

A charting software can be built or be bought. It solely depends on your service provider. 

The data feed is needed to be bought to have a live price display on the software and generate the signals for the software to make a buy/sell decision. 

4. Live Testing 

The system is ready now — strategy has been selected, algorithm formulated, and the whole system is ready to go. The only thing that remains is to check if the system is working as per everyone's expectations or not. 

In this step the whole system is put to use and tested. The algorithm generated signals are  tested and trade orders are executed. 

Conclusion

All this may make algo trading sound difficult, but only when you do it all by yourself. 

With the advent of time, the whole field of Algo Trading is growing, and so are the people who prepare the whole system. 

You are required to discuss your trading strategy with the service provider (us) and arrange for a good Infrastructure and all the difficult tasks will be done by your service provider i.e. Smart Algo. 

You need to log in to your account every trading day and you are good to go. With algorithmic trading you can save your time and money by avoiding human errors and emotional decision-making and so much more.

We at Smart Algo provide you with the best algo for trading integrated with API Bridge, Auto Buy & Sell Signals and Strategy Development Tools. 

Contact Us today for any query or to get a demo of our workings: +91 9826140465 or +91 8853615263 or info@smartalgo.in 

Thank you for giving us your time. We hope it was helpful.