Frequently asked questions (FAQs)
Solve your questions here. If you still have doubts, you can fill out the contact form and we will reply as soon as possible.
What is algorithmic trading?
Algorithmic trading is the process of using computers programmed to follow a defined set of instructions (an algorithm) to perform a trade in order to generate profit at a speed and frequency that is impossible for a human trader. Defined sets of rules are based on time, price, quantity, or any mathematical model. In addition to the profit opportunities for the trader, algorithmic trading makes the markets more liquid and makes trading more systematic by ruling out the impact of human emotions on trading activities.
In simple terms, algorithmic trading completely eliminates the need for manual intervention. Once the rules of logic have been encoded into the algorithm, it will scan the market for opportunities.
The algorithms can be used to trade any segment of the exchange: stocks, etfs, futures, forex, and cryptocurrencies.
How does algorithmic trading work?
Consider the following example:
Buy 50 shares of a stock when its 50-day moving average exceeds the 200-day moving average.
Sell the stock when its 50-day moving average is below the 200-day moving average.
Using this set of two simple instructions, it is easy to write a program that will automatically monitor the stock price (and moving average indicators) and place buy and sell orders when defined conditions are met. The trader no longer needs to keep an eye on live prices and charts or manually place orders. The algorithmic trading system does this automatically for him, correctly identifying the opportunity and executing the order.
What are the benefits of algorithmic trading?
Faster and more accurate: A trading algorithm can track even a small change in prices and execute orders faster than humans.
Processes large amounts of data: Suppose a trader needs to track 1 minute data for 10 stocks. Doing this manually has a very high risk of error. The use of algorithms completely eliminates the risk. Algorithms can also be programmed to process multiple indicators for multiple assets without loss of precision.
Eliminate human biases and sentiments: Algorithms will follow the instructions given, not allowing any biases or sentiments to influence trading decisions.
Allows for multitasking: Algorithms can constantly execute and execute orders according to the instructions given, without any manual intervention. This means that traders can have the freedom to create more strategies, take breaks, or spend time on other things.
Is it better than technical analysis?
When trading manually, the usual workflow for a trader will be as follows:
- Looking at charts, quotes or news and trying to find a trading signal according to your strategy.
- Execute the order at the broker when you find a trading signal (sometimes we miss it due to inattention!)
- Monitor your trades to see if they hit their target or went in the opposite direction.
- Close positions to record profits or cut losses.
All these tasks must be carried out immediately and accurately. Sometimes even simultaneously. Also, if the trader wanted to test/implement one more strategy, it is extremely difficult to manage both. In these cases, algorithms do all the heavy lifting of performing these tasks.
How can we help you?
Quantified Models puts at your disposal different fully automated trading algorithms, which can be traded on well-known trading platforms such as: TradeStation, Multicharts, or Ninjatrader.
We apply the latest technology in terms of algorithmic trading and artificial intelligence when designing our products, so our algorithms are robust and survive over time despite changes in the market regime.
Contact with Quantified Models for more information
Still have questions?
Write to us and we will answer all your doubts.