Key Algorithmic Trading Strategies

Key Algorithmic Trading Strategies

By Capital Markets CIO Outlook | Monday, January 11, 2021

Traders can track anything from moving averages and channel outputs to price fluctuations and other technical analysis metrics such as balance volume using algorithmic trader (OBV).

Fremont, CA: With computing power benefit, it's not a surprise that a new innovative trade in the form of algorithmic and quantitative trade has been brought about with the growing technological tide. Algorithmic trading is a type of automation that programs a computer to perform a particular collection of actions that may involve the acquisition or sale of a property due to changing market data. This trading system's key benefit is that it has the authority to enter and leave passively at speed and frequency, which a regular trader cannot do alone.

Traders can track anything from moving averages and channel outputs to price fluctuations and other technical analysis metrics such as balance volume using algorithmic trader (OBV).

Many traders use program patterns in algorithmic trading platforms following strategies, as they are the easiest to execute. This is because traders don't need to make any estimates or market projections to make a profit. Instead of predictive analyzes, the algorithmic trading approach relies on desired patterns.

A trader may want to include an OBV in his algorithmic trading strategy. This is called an indicator based on the momentum, which calculates the flow of trade volume to see whether the rise or fall of a particular market is directly proportional to each other, with trading volumes and increasing prices. Thus, as the stock raises the price, it is equivalent to an increasing OBV and vice versa. Traders can use this pattern as a mechanism for price validation, which ensures that companies can be immediately bought or sold if a rise in price movement is considered sustainable or a trend reversed, and the price starts declining.

Arbitrage, the practice of purchasing dual-listed security and buying it from one exchange and simultaneously selling it in another for a higher price, is another common technique that can be overloaded by the power of algorithmic trading platforms. Savvy traders can spot these openings for arbitration and can conduct trades and produce a profit on a much bigger scale by designing an algorithm that identifies price discrepancies across several markets.

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