algo trading: New trading strategy for retail investors
Published On: Wednesday, July 21, 2021 | By: Team KnowMyStock
Many retail investors have now begun to participate in algo trading, which was available only to institutional investors till a few years ago. The quant (the person who creates the algorithm or algo) studies historical data to come up with certain trading rules that he believes will make money. He then builds the algo, software that has those rules coded in, which then scans the market. Whenever the conditions that have been coded are met, it generates buy and sell signals. To access this, traders have to enroll on platforms that offer algo trading strategies, like Rain Technologies, Tradetron, Squareoff, AlgoBulls. The trader also needs to enroll with a broking firm that offers API (application programming interface) integration. An API gathers the signals generated by the trading platform and executes them in the trader’s broking account. Zerodha, Fyers, Upstox, Samco, 5paisa, among others offer API integration.
An algo can initiate trades or close out positions much faster than a human trader. “The trader does not have to spend his day glued to the screen since the algo monitors the market on his behalf,” says Raghu Kumar, co-founder, Rain Technologies.
Algo trading also eliminates human emotions. “Around 90 per cent of traders who trade manually lose money because they fail to control their emotions and make mistakes,” says Ramakrishnan Selvaraj, co-founder and director, QuantIndia Systems. Adds Rajesh Ganesh, founder and chief executive officer, Tripleint.com: “When a position goes into loss, retail investors wait for it to recover. And when it gets into a small profit, they book profit.”
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