Types Of Strategies You Can Use In Algo Trading
Algorithmic Trading is something that investors use in many different ways. Here are some of the most common. As an online share broker, we understand the need for an efficient online trading platformand we offer our customers just that. Also, get in touch with us for the lowest brokerage options. Rebalancing: Index funds constantly change their holdings to match the current market price of the asset they track. So, they give algo traders chances to take advantage of the trades that are expected and make money from the difference of 20–80 basis points. Most of these trades happen when an index fund rebalances are done through algorithmic trading. Trend Following: This is the type of algorithmic trading that algo traders do most often. In this process, they use moving averages, price changes, channel breakouts, etc. to make a set of instructions for the algorithmic trading software. Arbitrage: It is when you buy a stock at a low price in one market and sell it at a high price in another market at the same time. You make money from the price difference. Investors use data to find stocks that are trading at different prices and then use algorithmic trading to place buy and sell orders in both markets. Mathematical Model: Investors trade on the stock and derivative of the same underlying asset by using mathematical models that have been tested and shown to work. Since this can be a complicated set of trades, they use algorithmic trading to find these assets and place orders across different asset classes based on price changes. Mean Reversion: This strategy tries to take advantage of an asset's temporary highs and lows. If given enough time, the asset price will always go back to its average value (average price). VWAP: Investors use algo trading to set a price range for an asset and make sure it automatically buys or sells when the price goes in or out of that range. Investors seek to execute orders as close as feasible to the VWAP. With algorithmic trading, investors can break up large orders into smaller pieces that change over time and make sure their closing price goals are met. Please keep in mind that these are just a few of the strategies that you can use with algo trading. Apart from this, you can also trade breakouts, chart patterns and price actions as well. As we mentioned earlier as an online share broker, we understand the need for an efficient online trading platform and we offer our customers just that. Also, get in touch with us for the lowest brokerage options.