SOME WELL-KNOWN ALGORITHMIC STRATEGIES

On a broad sense most commonly used algorithmic strategies are Momentum strategies, as the names indicate the algorithm start execution based on a given spike or given moment. The algorithm basically detects the moment (e.g spike) and executed by and sell order as to how it has been programmed.

One another popular strategy is Mean-Reversion algorithmic strategy. This algorithm assumes that prices usually deviate back to its average.

A more sophisticated type of algo trading is a market-making strategy, these algorithms are known as liquidity providers. Market Making strategies aim to supply buy and sell orders in order to fill the order book and make a certain instrument in a market more liquid. Market Making strategies are designed to capture the spread between buying and selling price and ultimately decrease the spread.

Another advanced and complex algorithmic strategy is Arbitrage algorithms. These algorithms are designed to detect mispricing and spread inefficiencies among different markets. Basically, Arbitrage algorithms find the different prices among two different markets and buy or sell orders to take advantage of the price difference.

Among big investment banks and hedge funds trading with high frequency is also a popular practice. A great deal of all trades executed globally is done with high-frequency trading. The main aim of high-frequency trading is to perform trades based on market behaviors as fast and as scalable as possible. Though, high-frequency trading requires solid and somewhat expensive infrastructure. Firms that would like to perform trading with high frequency need to collocate their servers that run the algorithm near the market they are executing to minimize the latency as much as possible.

Adaptive Shortfall

Adaptive Implementation Shortfall algorithm designed for reduction of market impact during executing large orders. It allows keeping trading plans with automatic reactions to price liquidity.

Basket Trading

Basket Orders is a strategy designed to automated parallel trading of many assets, balancing their share in the portfolio’s value.

Bollinger Band

Bollinger bands strategy is a trading algorithm that computes three bands – lower, middle and upper. When the middle band crosses one of the other from the proper side then some order is made.

CCI

Commodity channel index strategy is a trading algorithm which actions are dependent on the value of a CCI index which bases on average and variance of some number of last trades.

MACD

MACD strategy is a trading algorithm which actions are dependent on two lines of MACD and the MACD Signal Line calculated with EMA.

Market Close

The strategy is designed to reduce costs interrelated with the market impact of huge orders. It works until the demanded time and may take advantage of the auction on Market Close.

Parabolic SAR

Parabolic SAR strategy is a trading algorithm whose role is to predict market trend change and trade assets in specific market conditions.

POV

Percent of Volume (POV) is a trading algorithm based on volume used to the execution of bigger orders without excessive impact on the market price.

RSI

Relative strength index strategy is the trading algorithm which actions are dependent on the value of an RSI index which bases on average wins and losses of a strategy.

Slow Stochastic Oscillator

Slow Stochastic Oscillator Strategy is build to gain profit on buying/selling shares in specific market conditions.

Statistical Arbitrage

Statistical Arbitrage (SA) is build to gain profit on simultaneously buying and selling two shares of two correlated instruments.

TWAP

Time-Weighted Average Price (TWAP) is a trading algorithm based on the weighted average price used to the execution of bigger orders without excessive impact on the market price.

VWAP

Volume-Weighted Average Price (VWAP) is a trading algorithm based on a pre-computed schedule that is used in the execution of a bigger order without an excessive impact on the market price.

Williams %R

Williams %R strategy is a trading algorithm basing on trend change indicated by Williams %R oscillator. Oscillator leads the strategy to set a long or short position.

Smart Order Routing

Technically Smart Order Routing technology will search for available liquidy across given trading venues, and with mid-point matching will get the best possible chance of price improvements.

Triangular Arbitrage 

Triangular Arbitrage is used when a trader would like to use the opportunity of exploiting the arbitrage opportunity from three different FX currencies or Cryptocurrencies. Triangular Arbitrage happens when there are different rates within the trading venue/s.