The hidden assistance in Indian stock market
Some of the unnoticed but well-established global firms like Hudson River Trading, Virtu Financial, Tower Research Capital, Jump Trading, Getco, Progress Apama, FlexTrade Systems, are running business worth hundreds of millions of dollars in India in the highly-secretive world of algorithmic trading in stock markets.
In market jargon, algos is famous for Algorithmic trading and relates to a software, composed to implement trading methods. Its essence is that it can execute trades in a fraction of a second, which seems impossible to do manually. The world of algos is all about the speed at which the trades are implemented. Delay by a split-second could reduce the potential gains. Or rather, its composition need to be very sharp to capture the small difference in the share price of a firm on the BSE and National stock Exchange ( NSE).
The sharpness of the speed comes with a set of the instructions, which are algorithm to place a trade. The defined instructions are designed on timing, price, quantity, or any mathematical model. Distant from revenue opportunities for the trader, algo-trading provides markets more liquid and trading more organized by ruling out the impact of human emotions on trading performance.
Well, these are a few instances which explain the competence of algo. But the more complex and advance algos are in the air of market participants. They say that the sophisticated version of algos is being used by the deep-pocketed global and even domestic institutional investors and brokerages.
Big banks, hedge funds and institutional investors are using algo-trading to prevent from humanly errors and to give supplement to the existing strategy. There are multiple benefits of this. Such as, it supports to trade without letting emotions get in the way of realising profits or losses. It uses algorithms to delicately tune risk management in your trading policy, implementing stops and limits on your behalf. It also supplement with the low maintenance, set the algorithms up and let them trade around your schedule, 24 hours, day or night. It increases opportunities as well. Participants can choose or create an algorithm as per the strategy, and maximise their exposure to opportunities in the underlying market.
Large Indian brokerages, such as Edelweiss Securities, IIFL, Kotak Securities and Motilala Oswal financial services, and many others have also proposed algo-based trading facilities. They serve foreign and domestic institutional investors who choose algos to implement strategy-based trades in India.
Moreover, market contributors come out with the information that the global majors have situated the organization in India for last 3-4 years and showing the regular growth in trading. They are confidential about these activities to stay away from unjustified regulatory and media attention.
Hence, the impact of the algo-trading is positive and every trade in the market is triggered by its decision and execution. The speed of execution has moved from milliseconds to microseconds and is expected to move to nanoseconds. The most essential advantage of it is that opportunities can be defined for all kinds of market trends. Overall, it is certainly assisting the traders domestically as well as globally.
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