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The role of the algorithm in human life is too essential, to ignore her. From the simple procedure of using the coffee machine to the music system in your car, from elevators to search engines, such, how Google — все это управляется набором логических инструкций — Алгоритмов, which enable us to meet our specific needs.
With the advent of the Internet, the potential of algorithms has proven to be its true power.. Identifying trends, identifying preferences using social networks and targeting relevant groups to specialized services - all this has become possible with the help of modern sophisticated algorithms.
Certainly, against the backdrop of all this technical progress, фондовые рынки оказались на переднем крае адаптации к захватывающему миру алгоритмов. Algorithmic trading is gradually becoming the preferred way to trade on stock exchanges., it accounts for about 80% of the total trading volume on Wall Street. Institutional Investors, hedge funds and large financial brokerage companies switched to algorithmic trading, to stay competitive, cost effective and satisfy the interests of its customers.
so, what is algorithmic trading or, what is it also called, «Black Box Trading»? Are the skills of a professional programmer necessary for success in algorithmic trading?? What investments are needed to create a workplace for an algorithmic trader?? These are just some of the questions, which I pondered, thinking about moving to a career in algorithmic trading.
Full openness of information: I am new to algorithmic trading. To familiarize myself with the topic, I looked at several forums on financial mathematics and algorithmic trading., but discussions, conducted there, only confirmed my wrong and inadequate understanding of the subject. so, I started talking to some experts in this field, to understand its pros and cons. I should admit, what is the safest way to research myths, developed around the usefulness of algorithmic trading.
In the process of saturating my hunger for knowledge, I researched a number of sources, some of which cited these operating instructions, while others have offered marketing gimmicks. My searches, finally, ended after a casual conversation with some of the quantitative analysts and high-frequency trading specialists at iRage Capital, one of the leaders in algorithmic trading in India. iRage Capital was founded in 2009 year and has since become respected in the Indian algorithmic trading market.
Below are some excerpts from the conversation.
About that, how to get started
I: Мир алгоритмической торговли до сих пор остается загадкой для многих людей, probably, due to the high requirements for the mathematical training of the participants. Can you show us, what remains behind the scenes when installing an algorithmic trader workstation?
Expert: I think, that the mysteriousness of algorithmic trading is exaggerated. Algorithmic trading is a fairly simple process of using a set of instructions to place orders to buy or sell stocks at volume and speed., which are impossible for humans. The set of instructions is based on various market indicators, such, as the price, time, volume and any other user-preferred metrics. The good thing about algorithmic trading is, that it excludes human intervention, thereby leveling the role of emotions and intuition.
Типичная algorithmic system architecture имеет три основных компонента — (and) Market data processor (b) Strategic module (in) Router claims. Market data processor, as the name suggests, receives market data and stores it. Trading Strategies, in the form of a mathematical model, are submitted to the Strategic module. It also serves as a liaison between the market and the trader.. Router (or manager) orders sends a request back to the exchange to make a purchase / sales.
To set up an algorithmic trader's workplace, you need to place your servers in the immediate vicinity of the exchange, load strategies into your system, after that, how will you test and validate them against historical data, set up a good internet connection and you can go!
I: Good. Now it doesn't seem so "mysterious". Considering, that I have gained some knowledge of algorithmic trading or financial mathematics, give me advice, how could i try my hand at this field?
Expert: well, Firstly, the most important step is to build a solid base. Master some programming skills and become familiar with how markets work. Being good at numbers always helps.. Start by learning basic subjects, such as statistics and econometrics. Some Books, for example, «Алгоритмическая торговля» от Эрнеста Чэна или "Trade and exchanges" от Ларри Харриса могут помочь вам в создании «правильной» алгоритмической торговой системы. When you are done with the above steps, practice building strategies, методов моделирования и статистических инструментов. Master different paradigms of trading strategies, Such, as statistical arbitration, execution strategies, difference between seller and buyer prices. There are several free courses, available online at Udemy and Udacity, which are very good for probing the soil. Есть и другие платные и продвинутые courses, accessible to serious students.
I: Отлично! Did you talk about programming languages. Which ones are often used by traders?
Expert: C ++ most preferred, as long as high-frequency trading (HFT) будет оставаться актуальной. The reason is, that memory leaks and related errors have much less space in C ++, compared to other languages. Python is primarily designed for strategy programming and backtesting, because it is easier to learn and supports good scientific libraries, such as Numpy. A number of forums today discuss investment and trading strategies, programmed in Python.
Is algorithmic trading only suitable for institutional investors??
I: Как себя чувствуют индивидуальные участники алгоритмической торговли? It seems to me, that the entry price is too high for them, to allow yourself to participate in algorithmic trading.
Expert: Затраты на участие в алгоритмической торговле, undoubtedly, above, than in the case of a traditional trading terminal. Placing servers on an exchange can be expensive. According to the latest statistics, nearly 70-80% Wall Street trading is done by robots, mainly, large institutional investors and hedge funds. Nevertheless, opportunities for individual participants are evolving with the advent of web platforms. For someone, who is not too worried about the delay, they have a certain charm. Besides, such companies, how Interactive Brokers предоставляют индивидуальным клиентам интерфейс прикладного программирования и программные пакеты, so that traders can program their own strategies and trading methods. Having mastered them, it will be as easy as logging into your Gmail account. You are logged into your account, testing your strategy, test it on historical data, And, after optimization, trade on real markets. It is also highly recommended to try to trade "on paper" or on a simulator..
I: How do you assess the general attitude towards algorithmic trading in India?? Are companies willingly choosing algorithmic trading?, taking into account its niche category and the need to attract highly qualified practitioners?
Expert: Algorithmic trading has been authorized by the Indian Securities and Exchange Council in 2008 year. For these 8 about years 50% trading volumes or even more began to be carried out using algorithmic trading. This speaks of her popularity.. Indian stock exchanges have adapted very well to change, constantly increasing the number of active participants. Both foreign and local investments use algorithmic trading to bring orders to exchanges.
A look into the future
I: What the future looks like on a global scale?
Expert: Очень перспективно, in fact. Understandably, that the future belongs to automation, she moves the world. In any field, automation is making a tectonic shift away from the traditional path and the same is true for the stock market.. In the US markets 70-80% объемов проходят через автоматизированные системы. Developing markets, such as India, наблюдают экспоненциальный рост в этой области. Certainly, markets develop every day, so that trading costs will decrease, from a certain point. The automotive industry is a good illustration, where, after the introduction of robots, they originally thought, that the industry will not be able to progress due to the high cost of capital.
I: Since you've been involved in algorithmic trading for a long time, could you list some of the biggest lessons, which she presented to you?
Expert: Great, in fact, quite a few. The most important of these is, that it is not enough to have a good trading strategy, you also need to have a competitive advantage. It can range from innovative ideas to low fees or markets, to which you have access, but you always have to have some kind of killer plan, if you plan to be successful. Treat it like any business as usual., where should you develop a strategy, to outsmart competitors. For any person, starting a new business, it is important to understand the nuances of trading.
I: Steeply! Thank you for your ideas. They really helped to dispel some doubts about algorithmic trading.. Can you tell me, what should be my next step, if i want to understand more in this area?
Expert: The best way is to find experts and authorities in the field., поговорить с ними и обсудить ваши сомнения. Try freely available online tools and resources. Get ready to embrace new knowledge and master new skills!
Original: https://habrahabr.ru/post/302326/
