Algorithmic Trading

iDog

Algorithmic trading is to use computer program to enter orders to market and decide the price, timing, etc. of the order. It's used to manage market impact, opportunity cost and risk.

Program trading is defined by the New York Stock Exchange as an order to buy or sell 15 or more stocks valued at over $1 million in total. Usually this requires the use of a computer program to handle.

FIX Protocol is usually used in these programs to communicate with other systems.

Clients want Direct Market Access (DMA) to go to market through market participants' trading systems, including algo trading systems.

Usually, algorithmic trading is used for executing investment decisions, so buy side companies are the main customers. The purpose is to minimize the execution cost (comparing with certain benchmarks like VWAP or arrival price, etc.).

Knowing the Market

• Major Markets
• Market Participants
• Major Trading Systems
• Order Types
• Principal vs Agency

Problems

• Execution Dilemma
• Market Impact
• Trading Cost
• Trading Risks

Trading Strategies

• Common trading strategies
• How to choose strategy

Post Trading Analysis

• Information needed
• Calculations