Unique Automated Trading Approach with ML

Unique Automated Trading Approach with ML

By Capital Markets CIO Outlook | Monday, March 18, 2019

Although a few parameters set by customers control most of the algo trading decisions, retail participants do not widely adopt trading. A lack of domain knowledge of data, skills and computer access has generally prevented a potential number of algo traders.  Presently, algorithmic trading for the stock market by far leads the overall market value segment and is expected to be successful in the near future.

Market data providers are now adapting to new technologies such as AI and ML to gain more market benefits. Traders may find it difficult to know which parts of their trading system work and what does not work because they cannot run their system on previous data. Consumers can use algo trading to run algorithms based on previous data to see if it has worked in the past. Building a trading system with these basics would, therefore, be easy even for the beginners.

Algorithmic trading has become more popular with institutional investors such as investment banks and hedge funds in India, accounting for almost half of total exchange turnover. It is mostly done using software provided by the brokerage company of a third-party provider. Since this trading requires a separate server, retail investors may find it costly. Consumers often prefer to learn about trading at their own pace, their ways, and appreciate support and guidance because it helps them learn quickly and better. They prefer self-learning courses to register. Some opt for a more traditional and robust approach to learning in the classroom, offering job placements and guidance to other carriers.

The main objective of active investment management is to achieve alpha, that is, returns that exceed the evaluation benchmark. The basic law of active management applies the information ratio in order to articulate the active management value. The main reason for applying ML in trade is to obtain fundamental asset predictions, market conditions or price movements. A strategy can use several ML algorithms that are built on each other.

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