ALGORITHMIC TRADING IN INDIA
What is Algorithmic Trading?
Algo Trading/ Algorithmic Trading: It is also termed as Automated trading and system trading. It is approved from exchanges and directly linked with NSE servers. In this, some specific rules regarding trade conditions are pre-defined for Entry/Exit. If these conditions are satisfied, the computer is programmed to automatically execute the bulk online trade and submit them to exchange. The language used by it can be any of AFL, MQL, C++, Python etc.
The pre-defined set of instructions may include Buying a certain Stock at a specific time or a complex one under the purview of indicators and mathematical models to take trading decision and Order slicing etc.
Algo Trading is a noticeable constituent of the Indian share market and occupies nearly 40% of overall NSE volumes.
In other words, Automated Trading or Algorithmic Trading is a computer trading program that automatically submits trades to an exchange without any human intervention. It costs a substantial amount as a different server is required for automated trading. We are the only discount broker offering fully automated trading facility for Institutional as well as retail traders without additional commission or omission for these features.
What does Robo Trading mean?
Robo Trading is fully automating your Algo (Not Legally) without the need for approval from the exchange. It is a kind of software acting as a bridge between your Charting Software and Trading terminal. On entry/exit signal in your charting software, it automatically places an order with a set of instructions already defined without any human intervention.
Is there any difference between Algo Trading & Robo Trading in India? What does Robo Trading actually do?
The basic difference can be elaborated as Algo trading India is approved from exchanges and directly linked with NSE servers. Also, they have two categories Semi-Automated Algo Trading and Fully Automated Algo Trading.
- In the financial market, HFT extended as High-frequency trading is a type of algorithmic trading characterized by high speeds, high turnover rates. HFT is a subset of automated trading. In this type of trading, opportunities are sought and taken advantage of in very less time.
While Robo Trading executes your trade entry or exit as per pre-defined instructions without the need for approval from an exchange(Not Legal). The Robo trading software is a bridge between your Charting Software and Trading terminal. On entry/exit signal in your charting software, it automatically places an order with a set of instructions already defined without any human intervention.
Do retail investors are allowed to do algorithmic trading in India?
Retail investors are not allowed to do HFT in India as per rule and your Trading terminal is normally not enabled / not having the feature of High-Frequency Trading. But they can do Semi-Automated Trading.
Reducing charges related to co-lo access by encouraging members to share co-lo servers and encouraging retail traders to use Algorithmic trading would be highly advisable.
Which is the best Algo trading software?
Algo Trader is the first fully-integrated algorithmic trading software solution for hedge funds and trading companies and also a first algorithmic trading software product to allow automated trading of Bitcoin and other Crypto-currencies. It enhances automation of complex, quantitative trading strategies in Equities, Forex and Derivative markets. It provides everything a typical hedge fund needs on a daily basis to run its operation.
Who Uses Algorithmic Trading Software?
Algo Trading in India is mostly used by large trading firms, such as investment banks, hedge funds,
and proprietary trading firms. The software is either offered by the brokers or purchased from third-party providers.
Which are the Top Algo Trading Platform ranges in India?
Catalogue of Best Automated Algo Trading Platform in India involves Omnesys NEST, Presto ATS, ODIN, AlgoNomics, MetaTrader.
FULLY AUTOMATED TRADING
We have compiled the Most Commonly Asked Queries about Fully Automated Trading.
1. What does it mean?
To make your trades fully automated you must have an automated strategy that could be tasked to trade its own. This very strategy will be having predefined buy/sell commands which can be then sent to the exchanges without any human intervention.
2. How to acquire a trading strategy?
Experts can have their own strategies. Otherwise, We have few strategies from Omnisys & Financial Technologies. Approx cost is 6000/PM + taxes per strategy per segment.
3. May I know few sample strategies?
Few predesigned strategies from Reuters (Omnesys) are as follows :
(i) Cash Vs. Future Bidding NFO/NSE, BFO/ BSE: This is an arbitrage Algo that captures the price differential between the cash and the future segment. Based on the user-specified mandate, it will try to place the order.
(ii) Future Vs. Future Bidding NFO/CDS/BFO :This is a roll-over arbitrage strategy that tries to captures the user-defined price differential between the two future tokens. Strategy will bid for the first leg based on the price of the second leg and the mandate specified.
(iii) Cash Vs. Future Arbitrage NFO/NSE : This is an arbitrage algorithm that tries to capture the user-defined price difference between the cash and future segment of the same exchange.
(iv) Option Hit Model (2L3L IOC) NFO/CDS : This strategy allows users to create any 2leg/3leg combination including straddle/strangle/butterfly etc. Orders placed are IOC orders, thereby ensuring that user’s mandate is maintained.
(v) 2L3L bidding NFO/CDS/BFO : This strategy allows users to create any 2leg/3leg combination including straddle/strangle/butterfly, etc. It is a bidding strategy, wherein under certain condition, user can get more than the desired mandate.
(vi) Conrev IOC NFO/CDS : This Option strategy takes advantage of discrepancies in the value of synthetic positions or violation of put-call parity principle. Since, the order is 3L IOC order involving one call, one put and one futures, user is nearly certain of maintaining the said mandate.
(vii) Conrev Bid NFO/CDS : This Option strategy takes advantage of discrepancies in the value of synthetic positions or violation of put-call parity principle. Because of bidding strategy, it will participate in the market waiting for the opportunity. Bidding strategy under certain condition is known to give more than the user’s desired mandate.
(viii) 4L Strategy (IOC + Bid) NFO/CDS : This is a 4-Leg Strategy that allows user to create any 4 leg option combination like Condor Strategy. Orders are placed as 3-Leg IOC + 1. In this strategy user has the choice whether to place orders IOC based or bidding based.
(ix) Option 4L IOC Strategy NFO/CDS : This is a 4-Leg Strategy that allows user to create any 4 leg option combination like Condor Strategy. Orders are placed as 3-Leg IOC + 1.
(x) Future Vs. Future Arbitrage NFO/CDS/BFO :The strategy is also a rollover arbitrage strategy that will place a Spread IOC order (2-Leg), whenever the market spread is greater or equal to the user-specified limit
(xi) Implicit Vs. Explicit Spread NFO : It is an arbitrage strategy between 2l IOC (implicit) and day spread (explicit). If the user specified mandate is better than the market spread, a 2L IOC order is placed, on trade of implicit, a day spread order is placed.
(xii) Implicit Vs. Explicit Bidding NFO : This is a strategy that tries to captures the user-defined price differential between the two future tokens and the spread token. Strategy will bid for the first leg of the implicit future (one token) based on the price of the second implicit futures token, price of the explicit (spread) and the mandate specified.
(xiii) Single Strike Bidding NFO/CDS/BFO: Single Strike bidding is the Vol. strategy wherein User trades option based on user-defined IV and hedges it in futures based on the specified delta option.
(xiv) Differential Strike Hit Model NFO/CDS : This strategy is a vol-based Two-Leg Option strategy wherein the user trades two options based on the IV/Rs Difference between two option contracts After completion of the option trades, it will hedge in futures based on specified delta. Both options are placed as a 2-Leg IOC order.
(xv) Differential Strike Bidding NFO/CDS : This is also a Vol based two leg option strategy, wherein the user trades two options based on the IV/Rs Difference between two option contracts After completion of the option trades, it will hedge in futures based on specified delta. Bidding of the 1st option can be based on the IV-Difference or Rs. Difference.
(xvi) Generic Pair NFO : This strategy allows user to trade in pairs for two different scripts in the same Exchange for a given spread/ratio.
(xvii) Value Neutral Pair NFO : This strategy allows user to trade in pairs for two different scrips in the same Exchange for a given spread/ratio. This strategy ensures that the value / quantity difference between the two scripts is as close as one another, thereby maintaining quantity/Value neutrality.
(xviii) Generic Pair Stop Loss NFO : This strategy allows user to trade in pairs for two different scripts in the same Exchange for a given spread/ratio. It is usually used for stop-loss pair orders
(xix) Market Making Strategies : BookMaker BFO This strategy allows user to stand on both sides of the book at a specified gap from the LTP.
(xx) Value Neutral Pair Market Making NFO-BFO : This strategy allows user to stand on both sides of the book based on the price of the other selected tokens of the pair.
(xxi) Cash (BSE) Future (BFO) Market Making BSE/BFO : This strategy allows user to stand either in future/ cash scrip on both sides in a book based on the price of the token and the mandate specified.
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