Algorithmic trading utilizes computer programs to automate trading processes, enhancing speed and accuracy beyond human capabilities. It involves a systematic approach for executing trades, aiming to minimize costs, reduce risks, and leverage complex prediction models. Key features of algorithmic trading software include market data access, configurability, and back testing capabilities, making it essential in a highly competitive trading environment.

1. AlgorithmicTrading
Presentation By
Bharath Goud
Jayadeep

2. What is an
Algorithm?
An algorithm is a specific set of clearly
defined instructions aimed to carry out a
task or process.

3. What is
Algorithmic
Trading??
 Algorithmic trading is the use of computer programs to
automate one or more stages of the trading process: pre-
trade analysis (data analysis), trading signal generation
(what to trade), and trade execution (when and how to
trade).
 Algorithmic trading follows a defined set of instructions
for placing a trade in order to generate profits at a speed
and frequency that is impossible for a human trader.
 The defined sets of rules are based on timing, price,
quantity or any mathematical model.

4. Why
Algorithmic
Trading???
Why Algorithmic Trading??

5. Objectives:
• Minimize cost compared to a defined benchmark
• Minimizing execution risk
• More reliable and faster execution platforms
(computer sciences)
• More comprehensive and accurate prediction
models (mathematics)

6. Benefits:
 Trades executed at the best possible prices
 Instant and accurate trade order placement (thereby high
chances of execution at desired levels)
 Trades timed correctly and instantly, to avoid significant price
changes
 Reduced transaction costs
 Simultaneous automated checks on multiple market
conditions
 Reduced risk of manual errors in placing the trades
 Back test the algorithm, based on available historical and real
time data
 Reduced possibility of mistakes by human traders based on
emotional and psychological factors

7. Process:
1. Generate or improve a trading idea.
2. Quantify the idea and build a model for it.
3. Back test the strategy.
4. Collect the performance statistics.
5. If the statistics are not good enough, go back to #1.
6. If the strategy does not add significant value to the
existing portfolio, go back to #1.
7. Implement the strategy on the execution platform.
8. Trade.

8. Process:

9. Process:

10. Various Types
of Algorithms
in the Market
Trend Following Strategies
Arbitrage Opportunities
Volume Weighted Average Price (VWAP)
Time Weighted Average Price (TWAP)

11. Anyone Interested in building an
Algorithmic trading Software?

12. Key Features of
Algorithmic
Trading
Software:
 Availability of Market and Company Data
 Connectivity to Various Markets
 Latency

13. Key Features of
Algorithmic
Trading
Software:
 Configurability and Customization
 Functionality to Write Custom Programs
 Back testing Feature on Historical Data
 Integration with Trading Interface
 Plug-n-play Integration
 Platform-Independent Programming

14. Give a Try:
 For building one, a good free source to explore
algorithmic trading is Quantopian. It offers an online
platform for testing and developing algorithmic trading.
Individuals can try and customize any existing algorithm
or write a completely new one.

15. Conclusion:
 Algo trading is a very competitive field in which
technology is a crucial factor.
 With the help of the algorithmic trading system the trade
activity becomes faster and better.

16. References:
 http://www.investopedia.com/articles/active-
trading/101014/basics-algorithmic-trading-concepts-and-
examples.asp
 http://www.investopedia.com/articles/active-
trading/090815/picking-right-algorithmic-trading-software.asp.

17. Thank you