Skip to main content

Algotrading and Stock Market

On the stock market, algorithmic trading evolves the fastest. Still, it is much more widespread among big players like hedge funds and investment banks than among individual traders. This is understandable, in our days of rapidly developing technologies, competition is also rapidly growing in this field. And in order to survive and earn a lot of money you need a lot of money to provide resources: attracting specialists and creating infrastructure for inventing and implementing more efficient algorithms.
 
On the stock market, algorithm trading has got a certain stratification into the following types of its applications:
 
Algorithms based on technical analysis.
Here, robots use technical analysis tools to monitor market movements and look for patterns and inefficiencies to make a profit on them.

Pair trading.
Two instruments are chosen here, one of which is a "cheater". That is, first there are changes on the guide, and then the second one is pulled up after it. Such inefficiencies disappear most quickly, being leveled by robots. But still, sometimes they can be found.

Basket trading.
This variant takes a bunch of instruments, which have a rather high, but not absolute correlation with each other. If some instrument is taken out of the group, it is expected that it will return to it sooner or later. And these expectations are traded by hft systems of this kind.

Market Making.
The task of the market makers of a particular trading instrument is to provide liquidity. So that at any moment a private trader or hedge fund can buy or sell it. And the market maker must do so even if he suffers a loss. But for such work the exchange, of course, will reward him. And to perform this function quickly and efficiently, market makers use special algorithms. And at the same time, both the algorithms and the rules of the exchange allow making profit, if it does not interfere with liquidity.

Front running.
These strategies track the emergence of large volumes, monitor the data in the glass, order ribbon and from the price chart. By identifying these volumes, they assess where the price will move when they are executed, how the price will behave when it comes to these volumes next time, which large players are likely to defend.

Arbitrage.
There are, for example, two different types of shares of the same company, which change synchronously, with 100% correlation. Or the same share is taken, but on different exchanges. On some stock exchange it will rise or fall a little earlier than on the second one. Seeing what happens on the first, you can open deals on the second. Due to fast speeds, such inefficiencies are becoming more and more ineffective, but still large players with billions of budgets can still squeeze out their profits here.

Volatility trading.
Here, the best minds analyze different instruments, making predictions about which of them may increase the volatility. They put their analysis mechanisms into robots, and they buy options for these instruments at the right moment.

Comments

Post a Comment

Popular posts from this blog

People completely disregard the choice of position size

                                               Choosing a position size is the part of your trading approach that tells you "how much". It's not attractive. It does not give you the impression of your control over the market, as the entry methods do. It simply tells you what you risk in a given trade. You have already learned from the balloon game that many people lose 60% of their money in the system just because of a bad choice of position size. And the wide variation of results in this game depends entirely on how much they are at risk. And all this can become your best helper in the market. So why the competent choice of position size is such a problem?   Problem 1: Gambler's error. How can you lose 60% of your money in the system at one-to-one bets? In a 60% system, you probably won seven or eight consecutive losses over 1,000 attempts. Bu...
Post a Comment
Read more

Diamond technical analysis figure

The figure Diamond or Diamond refers to classical graphical analysis figures.   It does not appear on charts very often, but the ability to identify it and use it in making trading decisions can significantly enrich the trading arsenal of any trader. How a Diamond figure is defined, what its features and similarities with other graphical analysis figures, as well as what market mechanics cause its appearance, we will analyze in this article.   Peculiarities of a Diamond Shape The diamond refers to the figures of the turn. That is, after its appearance, the trend most often changes to the opposite. That's not a 100% rule. But if the figure is correctly identified, if the context is correct and the Diamond is indeed found, the trend reversal can be expected with high probability.   This formation looks like a rhombus. But we decided to call it a more noble name. So, Diamond is a kind of flute that appeared after the trend. But it can be approximately in the middle of the pe...
Post a Comment
Read more

How to choose a Forex broker correctly

All traders on the first steps in trading face the question of how to choose a reliable broker that would execute all commands on time and increase spread as rarely as possible. The question of choosing a Forex broker is always relevant that's why the school of trading offers to understand what information about brokers is really significant, and what is only advertising. More information you can get here: https://signal-means-profits.com/reviews/forex-brokers/forex-broker-reviews-how-to-make-the-right-choice.html   The pros and cons of any broker you can easily find in many materials. We will not describe them in this article. It is important to understand only one thing that the profitability of trading depends directly on the broker. That's why we want to present you 5 factors for which you can easily choose a Forex broker. Of these, 2 factors are extremely important, and the other 3 are secondary and will serve you as a useful addition.  Criteria for Choosing a Forex Broker...
Post a Comment
Read more