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How is Algorithmic trading system helpful for retail traders?

Author: Ajaya Gupta
by Ajaya Gupta
Posted: Dec 26, 2019

Since the entry of Algo trading, it was majorly used for stock market purpose where brokers and institutional traders. As the time changed, retail traders too started adopting this Algorithmic trading method. The Algorithm trading system is gaining massive upgrade in the retail industry. Many e-commerce companies are now using this mathematical trading version. Let us find out how-

Let's say, John is a computer science graduate, now running his own e-commerce website also earning extra by programme trading in the derivatives markets.

Algorithmic trading, also called as the automated trading system, every trade is executed using software. The system carries existing instruction having back-tested algorithm trading strategy. There are multiple benefits traders can have using Algorithmic trading. Some of these are- fast trade execution, accuracy, the ability to discard ‘emotions’, etc. Not all these benefits are limited to stock traders, but also to retail traders.

So here are a few ways how retail traders can benefit with Algorithmic trading-

Multiplying the profitable trades-

If you have been Algo trading since long and want to try on retail, then you need to be able to increase the profit trades to earning more. As a retail trader, you must know that losses and wins happen together. You will only earn profit when your win is able to compensate your loss. This is how the Algorithmic trading works.

Restricting your trading decisions-

Traditionally, retail traders’ trade using their gut feeling based on the market condition. Although there is nothing wrong in doing it, but not every time it will work. When it comes to Algo trading, there is no chance of human error. Being a retailer if you are using Algo trading then you will get pre-decided entry- exit rules preventing any error. Algo trading system has pre-installed instructions that can help retail traders to get the trading done without facing any error.

Technology Advantage-

One of the advantages retailers can have with Algo trading is the choice of technology stack for trading. Traders can pick the best tools for the job; also, there are no concerns about legacy systems integration. Retail traders can make the best use of newer languages like Python or R now possess packages to construct an end-to-end back testing, execution and portfolio management. However, this benefit comes with the price tag. You will need either to build the stack by self or outsource the same.

Helps to increase the market Reach-

With frequent trading, retailers can gain maximum popularity. This is because it allows traders to build strategies and use modelling techniques to manage any kind of risks. Furthermore, you are able to trade in different tools including-options and derivatives.

To gain maximum benefit using automated trading strategy for your retail business, there are certain things required. Mentioned below are few-

Programming Skills-

This is the most important skill required to get promising results out of trading.

Trading Software-

You need to install the right Algo trading software that will allow for easy trading. Check out Tvisi, that offers highly featured Algo trading software.

Co-Location Facility-

Co location facility are provided by NSE and BSE exchange especially to hedge funds, institutional traders, banks. Generally, it’s not recommended to retailer due to it high cost. You need to have a server installed at the location of trading to minimize the execution. This is also called as high frequency trading.

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Author: Ajaya Gupta

Ajaya Gupta

Member since: Aug 23, 2016
Published articles: 10

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