• A pre-defined step-by-step method to accomplish a task • A computer model that takes an order and structures a sequence of trades • Computer programs that generate buy and sell orders and make lightning-quick trades • It is the automated execution of trading orders decided by quantitative market models. .

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

What are the trends behind it? • Regulatory Changes • Electronification of Markets • Improve Scale & Efficiency • Desire for Anonymity • Realization that Trading Is a Source of “Incremental Alpha” • Desire to Reduce Explicit and Implicit Trading Costs .

Various Types of Algorithms in the Market • Arrival price • Time weighted average price (TWAP) • Volume weighted average price (VWAP) • Market-on-close (MOC) .

Areas of Concern while setting Algorithms • Lack of Visibility • Algorithms Acting on Other Algorithms • Which Algorithm to Use? • Missing Ingredient—The Trader’s Gut Feel .

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

Simple trading system design a strategy a strategy a strategy a strategy a strategy a strategy a strategy BROKER Exchanges .

. ..What are the advantages? • Move First • Customise Quickly • Rapidly Evolve • Gain Access to Multiple Liquidity Pools • Operate within Multiple Asset Classes .

Contd… • Integrate Real-time News into Algorithmic Trading • Design for Low Latency Decisions • Research and Backtest Strategies • Learn from Experience • Integrate Risk Management with Algorithmic Trading .

Issue with the Algorithmic Trade • Filtration • Consistency • Internal Order Matching • Rapid Strategy Implementation • Safety .

• With the help of the algorithmic trading system the trade activity becomes faster. . • So one has to not depend fully on the algorithmic system.Conclusion • Algo trading is a very competitive field in which technology is a crucial factor. • But after all it is totally depends on the technology • There are lots of example of crashing in the market due to algorithmic trade system.

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