Let's start with the difference between algorithmic trading and quantitative trading:
Algorithmic trading is the process of using programming languages to transform your manual trading strategy into an automated trading setup. Backtesting with large historical data is feasible to determine whether the thusly developed algorithmic trading strategy would produce favorable returns in actual markets. The algorithmic trading approach may be carried out automatically or manually.
In quantitative trading, a trading strategy is developed and put into action utilizing sophisticated mathematical and statistical models to generate alphas.
Why should you go with algo trading
Let’s see how beneficial algorithmic trading is contributing to the financial industry.
· It clearly distinguishes between favorable and unfavorable trades. Algorithmic trading is preferable to manual trading for several different reasons. It performs mathematical tasks and does not miss out on trading opportunities.
· Algorithmic trading, which is faster than manual trading, helps in obtaining the best price in line with the specified strategy. It also guides you in making more systematic and strategic decisions by back-testing the strategy on very large data sets and managing multiple orders on a large scale.
· We can count on the fact that machines don't have feelings yet! Whereas, this is a huge disadvantage in manual trading. Fear and greed can cloud your judgment in making the right decision. Machines do not make decisions based on external factors because they simply follow what is written in the program.
· Algorithmic trading is the most effective when it comes to time savings because it simultaneously monitors and trades instruments and manages multiple clients which will manage their trade logs providing resiliency, reliability, scalability, and at the same time not compromising on latency. Algorithms automatically execute trades when they meet your strategy constituents based on live market conditions with instructions such as Stop less, Take profit, and Position Sizing.
· Controlling your risk when trading is essential to minimize your risk of suffering losses as a result of stock market trading. Risk management entails identifying, evaluating, and mitigating risks that typically arise when the market moves in the opposite direction of expectations.
How can you get started?
It is critical to realize that, as with everything else related to money and trading, you need to receive proper training and gain an understanding of how algorithms are created and how they operate on various trading platforms.
But if and when you decide to begin, you'll need a plan. Now, if you know how to code, you could create your own. Alternatively, you might select one of the pre-built algos offered by many algo trading platforms, which also include backtesting data (past performance).
Another way to get into it is by learning from professionals
6 Months Weekend Program
The PGPAT course, or Post Graduate Program in Algorithmic Trading Online, conducted by IIQF, is taught by highly qualified and experienced market practitioners and is a job-oriented master in Algorithm Trading online course that aims to produce industry-ready Algo-Traders who can join the trading desks of various financial institutions or set up their own independent algorithmic prop trading desks. We do offer a Certificate Program in Algorithmic Trading (CPAT) online with world-class faculties. Enroll now. You can also check the Indian Institute of Quantitative Finance Reviews online.