A successful algo trading strategy is a no-frills approach to build successful trading systems and includes the right depth of rules in your algorithms which Avoid common traps at each step of development and testing and Know exactly when your algo system is ready to stop paper trading and make real profits. Algorithmic trading (also called automated trading, black-box trading, or algo-trading) uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. The trade, in theory, can generate profits at a speed and frequency that is impossible for a human trader. The defined sets of instructions are based on timing, price, quantity, or any mathematical model. Apart from profit opportunities for the trader, algo-trading renders markets more liquid and trading more systematic by ruling out the impact of human emotions on trading activities. Any strategy for algorithmic trading requires an identified opportunity that is profitable in terms of improved earnings or cost reduction
The most common algorithmic trading strategies follow trends in moving averages, channel breakouts, price level movements, and related technical indicators. These are the easiest and simplest strategies to implement through algorithmic trading because these strategies do not involve making any predictions or price forecasts. Trades are initiated based on the occurrence of desirable trends, which are easy and straightforward to implement through algorithms without getting into the complexity of predictive analysis.
It is the high-frequency traders who search for trading opportunities in a one-millionth of a second, Trading in such a small time frame is a team effort which requires the best of statistical abilities, technology, and domain knowledge. Successful Algo Trading strategies is an automated system of trading which uses advanced mathematical models and formulas, pre-programmed trading instructions, and complex algorithms to make high-speed decisions and transactions for executing large orders in the financial markets.
It is an extreme form of Algorithmic Trading characterized by high speeds, high revenue rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools. Algo trading helps react to market events faster than the competition to increase the profitability of trades. Trading exhibits some promising potential growth for the times to come. Various businesses have sprouted around Algo Trading and have been accepted by the vast trader community.