Algorithm trading, also known as algo trading, has been gaining popularity in recent years due to the processing of large amounts of data and providing market opportunities to traders. Algo trading is a process of using computer programs to execute trades automatically by providing a pre-defined set of rules. The specified sets of directions are based on price, timing, quantity, and volume. It rules out human emotions during the trades, making it more systematic.
Algo trading is not only limited to traders making good profits. Algorithms are also useful to mutual fund companies as well to deduct a fixed amount every month from your bank account for SIPs. Mutual Funds, hedge funds, insurance companies, banks, etc., use algorithmic trading to execute many high-volume trades that are otherwise impossible for humans to complete.
Let’s understand how algo trading works with a set of instruction
Instruction: Buy 200 shares of ABC company if the price goes above Rs 500 after 1 PM.
Now, if the share price goes above Rs 500 then the order under algorithm trading will be executed automatically for 200 shares. However, the trading algorithmic software will only execute the order only if the target price is reached before 1 PM. The directions are no longer valid after 1 pm.
What is Algo Trading Software?
Algorithmic trading, often known as automated trading, algo trading, or black-box trading refers to trading stocks using a computer program that is loaded with several pre-programmed trading instructions. While an automated trading transaction is fairly unpredictable, it might accrue profits more frequently and faster than human-based stock trading.
Algorithmic trading not only awards stock traders an unmatched opportunity to accrue profits but also encourages market liquidity and strengthens the trading ecosystem by controlling the human-based effects on trading decisions. The best algo trading software in India can be defined by the trust of a large number of algorithmic traders, who can choose to make smart trading decisions using their funds.
To ensure that trade orders are processed quickly and properly, a proven trading software system is needed. However, in today’s dynamic algo trading environment, malfunctioning software or software lacking crucial functionality may result in significant losses. In order to help you choose the best algo trading software in India, we’ve listed the main factors to take into account.
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Best Algo Trading Software in India
Algorithmic Trading is commonly known as Algo Trading or Automated Trading and is largely defined as a way of trading driven by pre-programmed trading instructions. These instructions can be customized to meet the trading objectives of the traders in regard to time, volume & price. Algo trading is meant to process trade orders in a quicker way as compared to typical human-driven trading. This type of stock trading is mainly used by mutual funds, investment banks, and hedge funds to execute a large volume of trades quickly and effectively.
If you are looking for the most reliable and effective algo trading software in India, below are some of the most popular options worth considering.
List of the Best 10 Algo Trading Software in India
|Algo trading platform
|Meta Trader 5
|AlgoBulls Technologies Private Limited
Zerodha Streak is one of the best algo trading software in India and it can only be used by Zerodha clients. The best part of this algo trading software in India is that one can trade anytime, anywhere.
Streak is loaded with a number of features that can help stock traders get the most out of trading. The three main aspects of Zerodha Streak – Strategies, Technical, and Scanner. In other words, Streak allows traders to gain an edge that is much-needed in today’s dynamic stock markets. By using systematic trading, live placement, and backtesting, traders can manage their trade orders easily and effectively.
There are two plans provided by Zerodha Streak – Rs. 690 and Rs. 1400 that differ in terms of available features.
Salient features of Zerodha Streak
- Create a custom watchlist
- Say yes to impartial trading decision-making
- Scan any sector in no time
- Use live or paper trade
- Option to backtest in seconds
- Smart UI for modern traders
- Create strategies & deploy them to markets
Zerodha algoZ is another algo trading software in India which is a full-fledged TA (Technical Analysis) platform designed for retail traders. The software does not just allow traders to use charting but it allows traders to create a strategy, backtest it, and check if it is generating profits and then you can move the strategy live semi-automated.
Zerodha algoZ – Major Features
- Availability of a number of indicators that intend to help traders practice precise trading
- Charting feature for the analysis of stocks in a fixed time frame like 1 min, 5 min, and 1 hour, etc.
- Regular charts of more than 3 years and intraday trading record of 22 days
- Along with automating trading, the tool aids in both the creation and back-testing of trading strategies.
- Advanced backtesting tools
- Write, backtest, and partly or fully automate a trading strategy
- Strengthened LIVE market strategy
- Awesome customer support
- Effective trading strategy formulation due to the presence of next-gen analysis tools
Based on the cloud computing mechanism, AlgoTrader is a commercial-grade Algo trading software product. It is mainly used for performing numerical research, trading strategy formulation, back-testing, and automated trading for both conventional securities and cryptocurrency.
AlgoTrader offers all the tools a typical quantitative trading business needs to manage its trading and research activities. The automatic trading of Bitcoin and other crypto assets is made possible by this, the very first and most sophisticated algorithmic trading software program. A Java-based algorithmic trading platform called AlgoTrader allows trading companies to quickly create, simulate, implement, and automate any quantitative trading strategy for any market. It was created by specialists in the field to provide customers with complete control over fast, fact-based trading for reliable, excellent outcomes. The full automation of any quantitative trading technique is possible.
- Availability of a number of charts and indicators
- Option to trade in Cryptocurrencies
- 15 interfaces/adapters
- Various alarms and notifications
- Strategy-based UI enhancements
- Simple software installation
- Storage of up to one million values per second
- Storage space savings due to compression
- Flexible data queries via tagging
- 200% back-test acceleration
- Real-time tick-to-bar combination
- Swift Esper Engine that can process 5 million events/sec.
- AlgoTrader can manage high-frequency trading thanks to its considerable data processing capabilities. Moreover, the earnings of institutional dealers.
- Software that can be modified
- After installation, support will offer instruction manuals and online training.
- AlgoTraders’ framework is solid and modern, with a strong emphasis on reliability.
- Use of contemporary technologies
- Accessible algorithmic trading tools
Meta Trader 5
MetaTrader 5 is a multi-asset, multi-operational, commercial trading platform. MetaTrader 5 provides trading in equities and commodities in spite of being less popular than MetaTrader 4, which emphasizes the currency market.
It also provides integrated trading robots, a library of independent strategy writers, copy trading, and virtual hosting as supplementary services. It is accessible online, on mobile devices, and over the web. Working with your broker will allow you to access the platform interface in 31 different lingoes for free. This is the best Algo trading system for seasoned and day traders.
- Advanced order types – ‘buy stop limit’ and ‘sell stop limit’
- 8 additional built-in indicators, and 13 more visual elements as compared to MT4
- A comprehensive, integrated economic calendar that displays news release schedules, effective grades, historical data, and market sentiments.
- 21 timeframe charts, 12 more than is available on MT4
- A multi-threaded strategy tester that has strikingly quicker execution speeds when testing programmed trading strategies
- Easy fund transfer between various accounts
- Understand the depth of the market through a graphical representation of bids and provide an original financial asset, given the trading volume
- Option to send emails with attachments
- Apart from the forex as CFDs, traders can also trade in, futures, cryptocurrencies, bonds, and options
Another popular and free-of-cost Algo trading software in India is AlgoNomics. It is a wonderful algo trading tool for traders who like to make decisions on their own without relying on human judgment, which is perfect for individuals who prefer to have control over their transactions.
Compared to other platforms, Algonomics’ algorithm can watch and forecast market movements in real time, giving consumers a higher possibility of financial success with lower risk. Its salient features are:
- Easier and faster bulk trading
- Comes with a built-in risk-handling feature
- Easy access to pre-defined trading approaches
- User-friendly Graphical User Interface (GUI)
- Reduced transaction cost
- Low-latency smart trade execution
- Detailed monitoring and control
Presto ATS is an all-inclusive platform for designing, testing, deploying, performing, and monitoring completely automated trading or execution algorithms using asset classes offered by Indian Exchanges. A framework for deploying Algos with Live Market Data and Direct Market Access (DMA) is provided by Presto.
- Adaptable Platform
- Run several algorithms created using Presto Studio
- Communicate seamlessly with a variety of markets and data vendors
- Presto Studio and open APIs (Application Programme Interfaces) allow for the creation of custom algorithmic strategies.
- Internal RMS is activated for Exchange and SEBI compliance.
- FIX supported
- Accepted by Several Exchanges
- Connectivity for Excel, TradeStation, and Amibroker
- NSE, BSE, and MCX are given direct market access.
- BIRT-based Reporting engine and customized reports
- Order routing system for inviting orders from third-party providers and channeling them to various exchanges.
AmiBroker is a very adaptable tool loaded with all the fundamental features needed to build a trading system from the start. Portfolio backtesting, optimization, Monte Carlo simulation, Custom Backtester, and support for Quant trading are a few of the important features you would love to work on. You might need to utilize AFL (AmiBroker Formula Language) to code your strategies. Your orders may be automatically placed using plugins like Pi Bridge for Amibroker based on buy/sell signals from a strategy.
- Built-in debugger
- Advanced code editor
- Analysis window to find all scans, discoveries, optimizations, portfolio backtests, wal-forward tests, and Monte Carlo simulation
- Screen markets to seek opportunities
- Get optimum parameter values
- Scoring & ranking
- Sturdier, simple, and visually appealing charts
- Automation and batch processing
TradeTron is one of the best Algo trading software systems and is designed to help build and automate Algo trading strategies without writing any code. By using it, strategy developers can create and test conditions for a trading strategy and sell those to traders and investors.
- A wonderful tool for new traders
- Access and modify a distinctive trading strategy built by other traders
- Event and quant-based algo trading strategies
- Strategy building wizard
- Quicker trade executions, real-time trading strategies
- Minimum multiple for subscriber
- Display positions to nonsubscribers
- Verify each subscriber manually
With the copy trading function of the eToro automatic trading program, customers may put their whole portfolio on autopilot. A $10 minimum deposit is required to establish an account, but $200 per trader is required to start copy trading.
You may copy the trading strategies of experienced traders and use the Algo trading platform without having to pay any fees to the platform.
- No cost to copy trading
- Awesome customer support
- Simple and quicker opening procedure
- Easy leverage, single-click trading, and faster liquidity
- Invest in ETFs
AlgoBulls is a reputed Algo trading software that gives traders access to automated trading algorithms for trading. Additionally, it may be used to create and implement a variety of trading strategies across different trading assets.
You may select from a variety of AI-driven tactics and modify them without having any coding knowledge. You also gain access to a fixed-income market through which you may quickly invest in a variety of bonds and non-convertible debentures.
- Build strategy and earn money from trading methods.
- It assists with paper trading and backtesting in addition to predefined trading methods.
- Contains more than 150 trading indicators
- With over 10 million customization possibilities and more than 500 algorithmic approaches
- Allows traders to practice your methods before using them in real-time on the trading market.
Algo Trading and Manual Trading
The major reasons why algorithmic trading is more common than manual trading are speed, accuracy, and cost savings. Algorithms are faster than the human eye in spotting patterns and making trades. Accuracy and precision are better when using an algorithm since the computer will follow specified instructions. A further benefit of algo trading is that it continually examines your orders without your awareness, which significantly cuts down on the amount of time required to trade at reduced transaction costs
How does Algorithm Trading Work?
Algo trading works by using simple instructions and a defined set of conditions. It works on formulas where you just need to set defined instructions for your entry and exit points and it will automatically complete the trade. The most important step in algorithmic trading is to have the correct strategy that has been thoroughly back-tested because the success rate of the trade is largely determined by the effectiveness of the strategy.
The trader is no longer required to manually enter orders or watch live prices and graphs. his is done automatically by the algorithmic trading system by accurately identifying the trading chance or opportunity.
Algo Trading in India
Algo trading was introduced in the year 2008 in India, and it was mainly used by institutions and brokers. But in recent times, the participation has increased with retail investors and the opportunities are huge. However, Algos still account for only 50-60% of all transactions in India, and people are still not very aware of this concept.
Several companies introduced APIs (Application Programming Interfaces) that allow retail customers to place buy and sell orders automatically. And SEBI continuously is bringing guidelines to increase the use of algorithm trading and using it effectively. In recent years, many Indian brokerage firms and financial institutions have developed their own algo trading platforms, offering traders access to advanced trading strategies and technologies.
Advantages of Algo Trading
- Zero Human Error: As a human, we tend to make mistakes while placing an order or any transaction, which ultimately leads to heavy losses. Also, emotional and psychological factors play a big role which human usually neglects. All these errors are reduced when orders are placed through algo trading. Once the algorithmic programs are configured, trades are performed automatically, which aids in the development of the trading discipline.
- Analyze Large Data Sets: Algo trading is mainly useful to traders who lack the time or resources to manually analyze large amounts of data. Best trading algorithms can be programmed to scan through large amounts of data to identify patterns, trends, and trading opportunities that would be difficult or impossible for human traders to spot on their own.
- Quick Transactions: Algo trading can assist traders in executing trades more quickly and efficiently, which is particularly important in volatile markets. Orders are executed in fractions of seconds, which is impossible for a human, and the speed is so accurate that the trade can be executed at the exact amount.
- Low Costs: Transaction costs are comparatively lower, which makes a huge difference in high-volume trades. This also eliminates the intermediaries who are typically used to curate a portfolio, reducing the overall cost of trading.
- Elimination of Emotional Bias: Algo trading removes the emotional bias from trading decision-making. As a result, trades are based purely on factual data and analysis, reducing the possibility of human error.
Disadvantages of Algo Trading
- Technology dependence: Algo trading is highly dependent on technology and high-speed internet connection. In situations of any technical glitches, traders or users may face huge losses.
- Complexity: Algo Trading implements complex strategies and has various regulatory requirements. Algorithm trading is subject to a range of regulatory and compliance requirements, which can create additional costs and complexity for traders and investors.
- Less customization: Algorithmic trading systems have pre-defined rules and instructions, which limit traders’ ability to tailor their trades to their particular requirements or preferences.
Algorithmic Trading Strategies
Multiple algo trading techniques can be used by traders and investors to build a profitable trading portfolio. The price Action Trading algorithm is based on 5 conditional algorithms for entry, exit, and money management. Some of the most popular algo trading strategies are listed below:
- Index Fund Rebalancing: The index fund portfolios undergo continuous changes, depending upon the underlying asset price fluctuations. This creates lucrative trading opportunities for algorithmic traders. Depending on the number of stocks in the index fund, they make profits from the difference of 20 to 80 basis points. Such trades are done with the use of algorithm trading with lower transaction costs.
- Arbitrage: The arbitrage process involves buying a stock at a lower price and selling it at a higher price in another market, making a profit from the price difference. This strategy can also be used in stocks and the futures market. Algo traders use this strategy with the help of algo trading and make it profitable.
- Trend Following Strategy: This is the best algo trading strategy that traders use. They use channel breakouts, moving averages, price level movements, etc for algorithm trading. By using algorithms, trades are initiated in response to desirable trends that are easy to implement and straightforward to follow.
- Mathematical Model: Mathematical models are important in the development of these algorithms because they assist traders in identifying patterns, trends, and possible market opportunities. Traders use this model to trade on the same underlying asset of stock as well as derivatives.
- Mean Reversion: This strategy is based on the assumption that security can experience highs and lows at various times but will ultimately return to its mean value (average price). Traders use algo trading to find the deviation from the mean price and define the asset’s price range and accordingly trade if it breaks in or out of the specified range.
How to Start Algo Trading?
To start the algo trading, here are the requirements you need to fulfill:
- Market Knowledge: The first step in any type of trading is to clearly understand the market. Before you begin your algo trading journey, you need first to get a thorough knowledge of the instrument you intend to trade, so that you can develop a hypothesis on which to base your trades.
- Learn to Code: Coding is something, which you should know before using algo trading. If you don’t know how to code, you can learn some coding languages like Python and develop an algorithm that works for you, or you can have it coded by any professional.
- Back Testing: You need to always back-test your strategy before going live. You need to check its profitability on historical periods of market performance. You can also use third-party back-testing tools to ensure that your algorithms are working properly.
- Right Platform: Several brokers are offering you the platform for algo trading to execute your trades. Select the one that offers good features, supports your algorithm, and provides a variety of tools for optimizing your trading strategy.
- Go Live: It’s now time to put it into action. Once you are satisfied with your formulas, go live. Keep an eye on how it performs in the market and how it functions in practice. Sometimes your program does not perform as you expected. You may have to start over or make changes based on your needs.
- Keep Developing: If your algorithm did not work the first time, do not worry! Try to do continuous experiments and see what actually works. If you don’t have the time or skills to create your own algorithm, you can also buy Algo software to do the work. Conduct your study, back-test the strategies, and select one that meets your needs.
Things to remember when doing Algo Trading
- A single flaw in the algorithm can cause you to lose a significant sum of money on a single transaction. So, always back-test first before going live.
- Traders must constantly improve their technical skills in order to develop algorithms.
- Traders rely on technology to do trading. So, in case of any failure, traders can face huge losses.
- Traders must keep an eye on the system to ensure that no duplicate or missing orders exist.
- Algo’s are just like Alexa, they listen to your commands. You just need to place a buy/sell order and give them pre-defined instructions.
- It can help you in placing an order at accurate prices without any chance of human errors.
- Algorithmic trading is highly technical and necessitates an extensive understanding of the financial markets, data analysis, and computer programs.
- Traders may sometimes face losses due to technical errors or malfunctions in the algorithms.
- A human trader may take seconds or minutes to respond, whereas an algorithm will make a choice immediately.
- Before selecting an algo trading platform, traders and investors should conduct extensive research and comparisons, as fees and features can vary considerably.
When choosing algorithmic trading software, it is essential to take into account latency or the amount of time it takes for an algorithm to complete a trade request. Faster trade execution can result from lower latency, which can increase profitability.
Power to Handle Combined Feeds
Data from many marketplaces should be able to be processed in real-time by the best algorithmic trading software. This enables traders to profit from price differences across several marketplaces and seize arbitrage opportunities.
Another essential component of algorithmic trading software is customization. This enables traders to design and modify their trading methods to meet their own requirements and preferences. This entails having the option to change variables like the entrance and exit positions, the kind of order, and the profit objective.
A lot of software systems for algorithmic trading let users create their own original programs. As a result, traders have the freedom to design custom trading plans that are suited to their particular requirements.
It is crucial to choose the best Algo trading software in India that is inexpensive and contains a number of excellent features since algorithmic trading simplifies and increases the value of stock trading more than ever before. The aforementioned algorithmic trading software systems are the best in terms of functionality, uptime, cost, and other aspects. It is entirely up to you to choose the one that best suits your unique stock trading demands.
FAQs – Algo Trading in India
1. Is coding required for Algo Trading?
Ans. You should know the basics, there’s no need to be an expert in computer languages like C++ or C.
2. Is Algo Trading Legal in India?
Ans. Yes, Algo trading has been legal and permitted in India since SEBI introduced it in the year 2008.
3. Is Algorithm Trading Profitable?
Ans. Yes, algo trading is profitable if done in a systematic way along with risk management and backtesting of the strategy.
4. Which is the best Algo Trading software in India?
Ans. Some of the best algo trading software are Zerodha Streak, Zerodha AlgoZ, and Tradetron.
5. What are the risks associated with Algorithm Trading?
Ans. There are a few risks in algo trading like the failure of internet connection, malfunctions in computer systems, etc.
6. What is trading using algorithms?
Ans. Algo trading, automated trading, and black box trading are further terms for algorithmic trading. The amount of human involvement in this sort of trading is minimal, and computer programs are employed to trade more quickly and in larger volumes in accordance with pre-established specifications.
7. What is the outlook for automated trading?
Ans. The use of Algo trading is anticipated to expand quickly on a worldwide scale. Globally, it is anticipated that a major increase in Algo trading will be seen in both the derivatives and commodities markets.
8. What are the most popular trading algorithms?
Ans. Arbitrage Opportunities, Index Fund Rebalancing, Time Weighted Average Price (TWAP), Volume-weighted Average Price (VWAP), and Percentage of Volume (POV) are the most frequently employed trading algorithms.
9. Can individuals do algorithm trading?
Ans. Every person who participates in the stock market has an equal opportunity to participate in Algo trading.
10. How does Algo Trading operate and what is it?
Ans. Algo trading is automated trading with little to no human intervention. Algo trading is the use of computer programs with pre-defined parameters to trade at a pace that is beyond the capability of a typical human.
11. What is the most successful Algo trading approach?
Ans. Algo trading tactics differ from person to person. You may, however, develop your own cash, future, and option selling strategies using Indira Securities.
12. How to Become an Expert in Algorithmic Trading?
Ans. You should study quantitative analysis or quantitative modeling because these techniques are heavily utilized in algorithmic trading if you want to become an expert in it. As you’ll be investing in the stock market, you’ll need trading knowledge or past financial market experience. You may create a more logical algorithm that smoothly detects trends and offers insights with the aid of trading sense.