As the stock exchange and internet platforms warmed up, which became popular with the Internet’s development around the late 90s, trading became more common and accessible. But some are still wondering how it works and what is trading? Some are still lost, confused with numbers, with few rising as well as falling. Despite being a part of our daily lives, there are still doubts and questions in the news with stories that are not easy to answer. This is quite normal because they are fickle, so today they can be expensive, tomorrow they are not enough.
Anyone who decides to go into the negotiation business should do good research to limit any investment form. Some have become millionaires simply by trading stocks from the comfort of their homes. These are individuals who have studied and understood how to deal. They know what trading is as well as how to profit from it.
To enter the world of trading, you need to choose a company, a platform, also known as an internet broker, that will make market entry along with the ability to buy and sell assets available. It is also essential to understand the terms used in the trading world. This will go a long way in predicting and executing transactions safely, as all assets are affected by events. To become a trader, you need to follow some steps and options, but how to do it? Where to see? There are few questions as well as information to choose from as well as assimilate.
Trading strategies are in a position from several minutes to several hours; the less time the algorithm is in the position, the easier it is to control risks. However, with an increase in the frequency of transactions, the commission costs grow, which lowers the algorithms’ profitability. This is how trading strategies try to find a balance between risk and reward. As a rule, these are whole types of techniques collected in portfolios to diversify and stabilize the Equity curve. Simultaneously, exchange data for trading algorithms can come from various sources, and orders can be sent to multiple exchanges. At the core of the trading system are the engines that route and optimize data between algorithms and exchanges.
Exchanges have limits on the number of active orders with the frequency of their placing. If they are exceeded, access to trading can be suspended, and it will be possible to normalize positions only manually. A dangerous and risky situation is when a trading robot starts buying and selling uncontrollably, placing a vast number of orders per second. Before the robot gains a significant position or winds up the commission, this protection must be triggered. At the very least, it should give additional time for other protective mechanisms to work.
Buying ready-made software offers quick and timely access while creating your own allows complete flexibility to customize it to your needs. Automated trading software is often expensive to buy and can be full of loopholes, which, if ignored, can lead to losses. High costs can take away the realistic profit potential of your algorithmic trading company. Building algorithmic trading software by yourself is time-consuming, takes effort and concise knowledge, and still may not be foolproof.
Do not forget that non-standard situations happen today. Even in highly automated systems, they cannot do without human participation. Therefore, if something went wrong, you need to notify all interested parties immediately by automatically sending messages by mail, telegrams, or any other convenient way. Ideally, there should always be an on-duty trader who monitors the performance of the trading system. In case of failure, you need to quickly find the problem, fix it and return the trading system to work. It is necessary to keep detailed trade and system logs, especially in highly loaded systems with a large flow of orders. If the reasons for the failure are not found, then the subsequent failure may be fatal.
When many accidents have occurred, risk control is the last thing linked to trading algorithms, and it is realized that it cannot be managed without it. Just as safety protocols are written in blood, risk management in algorithmic trading is written in margin calls and leaked accounts.