Why Automated Trading is the Next Big Thing for Programmers

September 22, 2016 | Rocco Savage

Developers are increasingly becoming interested in taking their talents to the financial markets. This article from Programmable Web explains what algorithmic trading is and how it could be a natural progression for today’s programmers.

Like most other industries, Wall Street is being disrupted by the explosion in information processing technologies. Long established players in the hedge fund industry are finding themselves in uncharted territory and revamping their approach by hiring computer scientists and mathematicians. This approach looks to leverage the skills of these practitioners by setting up algorithmic trading systems as a way to automate trading activities in hopes of gaining an advantage over competing funds.

What Is Algorithmic Trading?

The term “algorithmic trading” is a bit intimidating on the surface, but the definition itself is not overly complex. In simplest terms, algorithmic trading is the process of using computers to place and execute trades automatically within a given market at the direction of a pre-programmed software application. The key characteristic of any automated, method-based trading system is that the computer designated to conduct trading operations acts autonomously within the marketplace, independent of any real-time human intervention.

Algo, or “black box,” trading requires several inputs in order to be a viable approach for active market participation. The following components must be present and readily available:

  • A comprehensive trading methodology or system: By definition, an “algorithm” is a set of steps used in a problem solving process. Accordingly, a trading methodology that is defined by concrete parameters governing trade selection and execution must be present.
  • Computer hardware: Computing power capable of supporting numerous software applications while simultaneously streaming live market data is required.
  • Software-based trading platform: Trading software is the trader’s gateway to the marketplace. In the case of algo trading, the software is programmed according to the tenets of the adopted trading system, and interacts with the market on behalf of the trader. Examples of trading platforms are Trading Station, MetaTrader4 and NinjaTrader.
  • Market connectivity: A high-speed internet connection to the desired marketplace or exchange is necessary to conduct trading operations.

Read the entire article at: Why Algorithmic Trading is the Next Big Thing for Programmers

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