Algorithmic or Algo trading is computer generated trading based on the algorithms fed in the trading system. These are generally used by financial institutions and PE to trade. Majority of trading in US is done through this in US and India is also moving in the same direction. Firms spend a lot of money in developing there proprietary algorithm in the hope to generate positive returns.
Just to give you an example of a trading Algorithm, we can code to look for any stock which is above 50 DMA, whose marker cap 
is more than 1000 Cr. and Willams %R (technical indicator) is below -20. Once you set up this trading system, it will scan all stock say every 5 minutes and will buy/sell the stock once the condition is met. This is just a very simple example of the algo trading. Some of proprietary algorithms can be of tens of thousands of lines of code and will look at say 100 condition before doing a trade.
But it is not like small day traders cannot utilize Algo trading to make their trades. One of the best things if you switch to Algo trading is that you don’t have to worry about the emotions while trading. Algo will trade only when all the condition you have written are fulfilled.
Common Used Strategy for Algo Trading
One of the most basic and used strategy is Arbitrage. Just to explain it in a little more details, say stock of Reliance is trading at 998.5 at NSE and 999.7 at BSE. Say your transaction cost is Rs. 1 so there is an arbitrage opportunity of .20 paise. Manual doing these trades is difficult but these can be very easily done by using Algo trading. Similar method can be used to trade between futures and cash market and take advantage of any arbitrage opportunity if it exist.
The other common algo trading strategies in Indian markets are trend following and market making.
Stock Broker providing Algo trading in India
1. Angel Broking – Symphony (www.angelbroking.com)
2. Zerodha- Pi (http://www.zerodha.com/)
3. Mastertrust- Omnesys (http://mastertrust.co.in)
There are basically two companies which are providing this services in India one is Omensys and the other is Symphony. Lately many brokers like Zerodha have come up with there own trading platform in which algo trading is possible. For example Zerodha also provide you option to write you own algo and can even backtest to see how profitable that strategy would be. For detailed review of Zerodha, please have look at Zerodha Review.
If you seriously want to do algo trading, you have to get real time data feed for stock market. This is generally pretty expensive. A better idea would be first to create your alrorithm and back test it on old data which you can get for free. Once you have refinend your algo and you are confident that it should be able to generate positive system, you can purchase the live data feed. Also to use it professionally make sure that you have backtested it well because once it is on live system, it would start generating trade based on the Algo you have written.
I know that this article doesn’t provide you all the info you will need but I hoped that it helped you in understanding what is algo trading. This field is still open and brokers are trying to test the water. SEBI also keeps on coming up with new regulation on Algo trading which brokers have to follow. So, this is a field which will still take some time to mature but I would advice you to open broking account with brokers who are trying to provide this to the masses. To read more about the broker, do see our list here.
hello friends,,can anybody suggest a good algo strategy for currencies trading in india.
I am willing to learn Algo trading . does any one can guide which programming language in need to learn for this . Any relevant books ? website ?
thank you
I am trading in zerodha past Two years in semi auto mode throgh Amibroker. But recently i came to know they are providing fully automatic trading facility in MCX
I am using omega (trade station) platform to develop the system from last years. But execution of these trades are very expensive and cumbersome…if any body can help that would be very nice
Thanks
Sanjeev
Automated trading Trading Software.(ATS)
I am from Hyderabad, I resigned my job and taken on-line trading of equities and commodities as full time job.
2.I have been working on this project for the last 4 years. I am not sure whether the information collected by me is correct or not. Please enquire and understand the facts.I contacted all reputed companies like Financial Technologies, Omnesys, Zerodha . Nifty Trading Academy etc.in India. First many people are not understanding what I am talking . Many people want to avoid mails, They interact with phone only ,They want to escape without commitment or clarity or legal problems or responsibility.It is only culture of India-lack of competenceandr commitment.. They are not taking complete sentences or good English. I am very happy to find Mr.Pritesh Mhatre who has completely understood and talking with clarity. Now I got hope that I cn succeed in my project.
3.Iam not convinced with any of the algorithms in the technical analysis books or trading softeware providers. I developed my own algorithm for equities in 3 years.by struggle and day and night hard work. I know very big money is there. So it is worth. I am a mechanical Engineer wiith two PGs in Industrial Engineering and Financial Management . I know how to do research.
4.I am not able to trade more than two scrips simultaneously.I want to have the automated trading software(ATS) to trade 40-100 scrips at a time for day trading, You can read my book -The last wonder Universal Day trading model- pubished by amazon.com.
3.I have bought ATS from Omnesys- Nest Plus. They advised me to open my account with Zerodha, I opened. Before buying software I have sent my detailed algorithm to them and they accepted to code my algorithm and it is fully automatic. After buying the software they told it is not possible for automated trading and based on their algorithm buy and sell signal will appear and I have to buy/sell mannually. My algorihm will fail with manual ordering. Now they are telling they are not able to understand my algorithm.I have not used any big mathermatics in my algorithm. I was upset and left it there( I am helpless. Zerodha is a very good sharebroker and NEST is super Trading software developed by Omnesys Later. I have wriiten a detailed mail to Omnesys to help me by charging more money..they replied asking me to take approval from Zerodha.. 3months back I sent mail to Zerodha and they never replied. May be they have not understood what I am asking.
4 I asked Omnesys I will have my own software engineer to link the algorithm to their NEST trading software.I need only their permission and technical support.I told in that case I will have complete selling rights in India and whole world.This is the problem expressed by Pritesh.
5. I have discussed with an experienced software Engineer and discussed for 8 hours. He understood and accepted to develop.the software. He has put the condition that there should not be any financial analysis in the algorithm. The fact is the algorithm was developed wirhout any financial analysis. only simple mathematics is used . Now I reached a dead end.
B.Nageswara Rao
Hyderabad
Mr. B.Nageswara Rao, very bad to hear all this issues with U. I m also a trader and doing Algo Trading.
plz mail me ur full algo solution and ur idea so we can work on that and make a good solution………..verma_gopal83 @ yahoo co in
Dear Nageswara Rao,
I have been reading about Algo Trading for quite some time now. Is it possible to connect with you? I was hoping if you could give some pointers.
[email protected]
Dear Nageswara Rao,
I have been reading about Algo Trading for quite some time now. Is it possible to connect with you? I was hoping if you could give some pointers.
[email protected]
If you are still looking for such service please let me know.. with python we are doing Algo trading with our own strategies and using brokers API services.
I am an experienced software developer. And I am working on an algorithmic trading system. I’d like to know, if any of these brokers provide API (a mechanism) to submit orders. An API will help me connect my system to broker’s system, and then my system can execute trades.
Thanks,
Pritesh
Hi Pritesh,
Yes Zerodha.com do provide algorithmic trading platform. You can even back test it on there system before making your strategy live.
-S
Hello Admin,
Thanks for the reply.
I would like to just clarify myself, I am building an algorithmic trading platform. My platform has all features like:
– Live and historical prices
– Forecasting based on technical analysis
– Trade generation & “execution”
– Portfolio management
– Strategy building and optimization
– Risk Management
– Backtesting
Now where I need help is in the trade “execution” part. That is where my system needs to have some sort of connection to the exchange. Which I believe will have to go through a broker system.
I dont need an algo trading system, because there are limits to which you can customize it. And I feel a good algo trading system needs to adapt to changing markets. So I need full control over the system, and hence I am building my own system.
Now without the order execution part, I will have to manually submit order using brokers trading platform/interface. But if a brokers platform can take orders from my algo trading system, then it will fully automated.
Thank you!
Pritesh
Got it Pritesh. I think there are API’s available from some brokers. You have to use the API to make sure that you can connect to the trading system provided by the Brokers. I would advice you to call few brokers who do provide Algo trading and have API to confirm if this would be possible.
Yup, will do…thanks!
I must say, information on this website is useful.
Regards,
Pritesh
Hi Pritesh sir,
I have similar requirement as yours. Did u contact any of the brokers for automated trading API? Let me know the good broker in this case in terms of service and cost.