Algo Trading

Today, technology has entered all aspects of human life, and by expanding it into the details of human life, not only has it made things easier and faster for us, but it has also been able to have a significant impact on the amount of money we earn And generally make it easier or even faster for us to make money.

Perhaps the financial markets where the most money in the world flows daily (they include something about 65% of the total assets of the world) have not been able to deny the influence of science in this field, which shows that trading in the financial markets is not an exception to this rule.

For many years, traders and even market giants, including banks, financial institutions and investment companies, have traditionally and manually analyzed and traded. Even today, when you are reading this article, this mechanism is in place. but it is decreasing very fast. Perhaps in the near future, traditional methods will become obsolete, and if we want to have a chance to succeed in these markets, we have no choice but to go along with this huge wave of technology and science.

Today, with the expansion of science and technological progress, especially in the field of computer and programming and artificial intelligence, many people around the world have thought of bringing this scientific progress into the financial markets and create a branch of new and modern science called algorithmic trading or algorithm trading.

Before we get acquainted with the concept of algorithmic trading, it is not bad to go back a step and see in the first place what this term is made of.

What is algorithmic trading?

Algorithmic trading or algo trading comes from the two concepts Algorithm and Trade. In this article, we are going to talk about each of these two concepts separately and Finally, let’s talk about the general concept of algorithmic trading.

The concept of trading

Perhaps this concept does not need to be explained and probably all of you are familiar with this concept. In this article, we mean trading in the financial markets. Let’s talk about the algorithm.

Algorithm concept

We can define the algorithm in simple language as follows:

Algorithms are a set of instructions that are used to solve various problems. These instructions are converted into code with the help of programming knowledge and form computer programs and Finally, it is implemented by computers and hardware.

For example, in the past, we used to endure a lot of difficulty to perform simple mathematical calculations, especially if we came across large numbers, but today, with the help of calculators, we can perform mathematical calculations at a high speed, without the slightest effort.

These calculators simply contain a series of instructions that are converted into code by programmers and are finally executed by small computers.

Now that you are familiar with the concept of algorithm, let’s go to our main topic à algorithmic trading

The concept of algorithmic trading

As you have become familiar with the two concepts of algorithm and trading, now we introduce the concept of algorithmic trading. Algorithmic trading simply means that we implement instructions into computer programs that can trade the financial markets and solve our problem, which is to make money.

A very simple example for deeper understanding

Let’s say you have a trading strategy where you buy at an upward crossover of the 30-day and 60-day moving averages And vice versa, you sell with the downward cross of the moving averages. Now this strategy is like an instruction that you can convert into code by programming knowledge and By your personal computer (in the simplest mode) run that program as fast as possible without the slightest error and losing a bit of opportunity.

Also, without needing to waste your life on the financial markets and destroy your nerves and soul due to losses in transactions that you will definitely encounter many times and take away the joy of living in peace.

You might say to yourself how easy this is. Algorithmic trading was this? All of these magnify algorithmic trading for us all over the world these days.

Also, you may say that we don’t just have the knowledge of programming, that we can entrust our trading strategy to someone who knows how to program and turn our instructions into a profitable trading robot. That too with the lowest cost that we can even think of. You can’t either.

I know now, even if you hadn’t thought of this with yourself, now your mind is confused and you are saying to yourself, he is telling the truth, why didn’t we think of it???!!!!!

Before we continue with this interesting and new discussion that you have never heard anywhere else, I would like to tell you that even if you go and see the limited number of people who have written articles about algorithmic trading on their sites And they are even among the top links of Google, they have the same level view of turning a strategy into code and building a robot that can automatically trade for you.

So don’t beat yourself up for not knowing much about algorithmic trading.Maybe even many people around the world don’t really know this concept, but don’t worry, you are going to understand this concept once and for all in this article.

I wish algotrading was really that easy, but unfortunately it is not like that!!!

We don’t use algorithms just to trade automatically. Rather, we can create complex and advanced computer programs that can identify profitable trading strategies or trading robots and give us gifts that we can make money from.

So finally, we can build advanced and profitable robots with the help of algorithmic trading and go to war with the market. To write these computer programs, we need not only the knowledge of programming and trading, but also other knowledge such as mathematics and statistics. , probabilities, artificial intelligence and data science are necessary so that the lack of each of these sciences makes the algorithm trading chain incomplete.

Maybe we all said that what is the use of this derivative and integral that we studied in school in our lives? You can get the best answer in this article:

))To get 65% of the total assets of the planet!!!!!!  ((

It has not been many years that people and companies have moved in this direction, so that it can be said that the beginning of this valuable science. It is obvious that getting this holy grail is not so easy, maybe even big companies in the world have not been able to get this holy grail with huge investments until today.

Note that here the Holy Grail means obtaining 65% of the assets of the planet And otherwise, with the help of this science, many people, including small traders and market giants, have earned a lot of profit.

Perhaps the most prominent of them are Ark Invest and AlgoChurch companies, which have been able to beat the S&P500 index in recent years with the help of algorithmic trading with differences.and take a long distance from its traditional competitors, including Goldman Sachs, JP Morgan and….

In algorithmic trading, no strategy, function or mathematical model, indicator or trading tool is preferred over another, and the only reliable reference that can tell which tool is really better and works are computer algorithms and hardware.

Maybe you say that humans can also distinguish what is good and what is bad? Maybe they have been able to do this until today. But the point is that we have thousands or even millions of trading tools and mathematical functions, each of which can be set in thousands of ways and Finally, combine and form trading strategies. The total number of these modes can be even more than the total number of atoms on the planet (which is much more than these numbers according to estimates).

Now we go one step further,Let’s assume that we combined these, now we have to check all these strategies, for example, in the last 20 years, moment by moment of the market, whether it is profitable or not???!!!!

Now I ask you a few questions: How many tools have you worked with so far? How many trading strategies have you succeeded in creating??Finally, in what period have you been able to check your strategy???!!!!!

It is obvious that humans cannot explore this huge space in any way.Maybe now you have realized the level of your knowledge and even those who traditionally operate in these markets.

It is obvious that humans cannot explore this huge space in any way.

Maybe now you have realized the level of your knowledge and even those who traditionally operate in these markets.

As you have seen, automating trading is the most superficial view that can be taken in relation to the modern science of Algorithmic trading.

This science is much more specialized than this.Obviously, it is not so easy to achieve this science and it even requires a strong team work. As the English people say :

The best fish swim near the bottom.

It is recommended that you read the article ((Difference between Autotrading and Algotrading)) and ((Algorithmic trading for Small Investors and  Market giants)).