Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading attempts to leverage the speed and computational resources of computers relative to human traders.

Algorithmic Trading

The majority of traders lose money. They lose money not because they don’t understand the market, but simply because their trading decisions are not based on solid research and proven trading methods. They make decisions based on their emotions and take excessive risks in hopes of getting rich quick. The best chance to trade profitably in the market is to remove emotion and luck. The role of luck can be minimized or removed using carefully tested methods based on mathematical concepts and statistical models. These methods often involve automated trade execution to remove the role of emotion in trading. In trading language, this is called quantitative trading. Quantitative trading generally consists of the research and formation of hypotheses based on mathematical and statistical models for backtesting the trade execution strategy and finally risk management. over 80% of trades in the USA are automated trades. major banks, financial institution such as JPMorgan, Morgan Stanlay, Golman Sache….

Quantitative Trading vs Algorithmic Trading

Quantitative trading is a subset of algorithmic trading. It involves the application of statistical and mathematical models to speculate in the financial market. For example, by checking the correlation between stock A and stock B when trading pairs (pair trading), or by spotting opportunities based on the standard deviation of a stock’s price from its median for example.

Algorithmic trading, on the other hand, turns your trading strategies into a computer program or algorithm. These trading rules can be based on technical analysis, fundamental analysis or quantitative analysis. The algorithm can check your rules continuously (24/7) during market hours and flag buy-sell opportunities. The trader can allow the program to immediately and automatically execute buy-sell opportunities.

Technical Analysis vs Fundamental Analysis vs Quantitative Analysis ?

Technical Analysis

Technical analysis looks at the price movement of a security and uses this data to attempt to predict future price movements. example: RSI, Bollinger Bands, MACD etc.

Fundamental Analysis

Fundamental analysis instead looks at economic and financial factors that influence a business. example: Balance sheet, Income Statement etc.

Quantitative Analysis

quants are not focused on what the market will do in the future, but they will try to develop a trading – investing strategy which can be quantified. example: Statistical Methods etc.

Quantitative trading strategies that will be discussed soon:

• Arbitrage Opportunities: is one of the quantitative trading strategies that fascinates me, it will be discussed soon.
  • Trading Range (Mean Reversion): as soon

Algorithmic trading strategies that will be discussed soon:

• technical analyses or fundamental analyses.

These techniques will be applied to stocks, forex, crypto and options.

To build these programs, the trader will need to collect data to create automated trading systems. Trading APIs are tools that help you create automated trading systems. With the help of trading APIs, you can create different automated trading strategies. there are several platforms that provide api for the creation of automated strategies (alpaca, oanda api, IBAPI, binance api…) these platforms are my favorite.

Next algorithmic trading project will be on the forex market with the mql4 language of the Metatrader 4 platform.

See my demo projects, just to show you how algorithmic trading works. youtube link here

Link to repository GitHub