Trading algorithms used by large companies
Category : Strategy
Algorithmic approach in the financial market develops more and more every year. There are new algorithms and strategies that are based on the program code, and not the perception of the traders themselves. All thanks to the large corporations in this sector. Thanks to the hedge funds, as well as to the large investment companies, the first fully-fledged automatic programs for fix api trading on the financial market were created.
A bit of history
The birth of trading robots began in the US stock market. For example, there is a small discrepancy between the values of the stock prices between the New York and Boston stock exchanges. Earlier, this delay was much longer. You may not notice it with an armed eye, not to speak about making a trade operation on it. But the trading robot can do it.
Today’s reality According to the statistics of the US Bureau, about 80% of the total volume of trading operations comes by the trading robots. This is not strange. After all, the hedge funds are much easier to pay for one-time development of an algorithmic program, rather than to pay fix api traders every month. Corporations have large resources, therefore in some of them special departments are created that are aimed directly at the development of algorithmic software. It will facilitate the receipt of passive income while not having inflated risks. There are three main types among the most popular software that market makers use in the financial market:
- HFT trading
- Fix apiarbitration
- Mathematical modeling
- HFT trading
These algorithms are based on high-frequency trading (http://www.businessinsider.com/the-fastest-traders-on-wall-street-are-in-trouble-2017-8) , which consists in opening a large number of speculative positions in a matter of a fraction of a second. Algorithm and logic robots of this kind can be absolutely any kind and depend on the goals that the robot should achieve. So there are trading robots that are capable to conduct fix api trading with the goal at the time of stock reduction and thereby massively selling a financial asset, reducing its value.
2. Fix apiarbitration
Above, I already mentioned about the essence of this technique. Arbitration consists in trading on the basis of exchange differences between the same financial asset, but on different stock exchanges. Let’s return to the example of the New York and Boston Stock Exchanges. There are algorithms that simultaneously analyze two different trading platforms and when a discrepancy in value appears on the market, it becomes possible for the robot to complete an arbitration position.
3. Mathematical modeling
Most investment companies are engaged in forecasting both the economy as a whole and of the individual sector. To make this, they use statistical data on the basis of which the forecast is built. Mathematical models serve as an additional filter in making investment decisions, because with the help of this tool the future asset movement is predicted. This can be both forecasts of the asset value itself, as well as the financial stability of the company or the economy.
These three approaches allow large companies to always be in the game and increase profitability without additional costs. But I draw attention to the fact that some of them can be used in the fix apiforex market, in particular, the arbitration algorithm. When it is used by different platforms, brokerage companies can act, which themselves create arbitration opportunities. Thus, the trading robot will analyze the asset value on one platform, which will be considered more rapid, and also will have actual data for the more slowly platform (http://forexrobotshub.com/2017/09/19/experience-using-lock-arbitrage/). Access to the fast one can be done using the fix api financial protocol. Then, the trader will have the opportunity to conduct algorithmic trading, which is used by large companies. And if this approach is used by market leaders, why do not we add it to our fix api trading?