The Trading Strategy: Algo Container

 

Trading software can make the work of managers more efficient. Managers can automate all tasks including sending orders and buying stocks. How?

 

A trading strategy or Algo containers makes life easier and if used correctly, it can lead to orders being sold at profitable prices. The function of the Algo solution is not limited to these. There are so many functions that occur behind the scenes.

 

The Algo engine or container is the main part of the system that contains different core components that allow managers to give instructions based on the current market conditions, including the quantitative models. Moreover, it can also perform different related assignments, allowing users to work with order management, risk management and data reference. It is also coupled with safety mechanisms that allow developers to focus solely on developing code.

 

The Algo container is tightly regulated. This means that there is little room for errors to occur. So the user’s instructions are followed to the tee. If for one reason or another, a bug should infiltrate the Algo, the container should be able to prevent any serious damage from occurring. The Algo container has an inbuilt system that facilitates regular checks. So it means it can detect and possibly correct any errors.

 

Contents:

Types of Trading Strategies

Algo Components

Algo Engine

Scheduler

Worker

Routers

Final Thoughts

 

Types of Trading Strategies

Algo or algorithmic trading is a solution that uses a computer program that applies a set of instructions (an algorithm) to place a trade. This type of trading tries to exploit the speed and computational resources of computers compared to human traders.

 

You can face two main types of Algo or Trading Strategies: VWAP and PROOF. Users can select one of the strategies.

 

The VWAP focuses on market volume while PROOF is all about reducing risks. With the PROOF strategy, customers can maintain high speeds of execution while still avoiding the negative impacts of the market. At the same time, users are equipped with an opportunist component that searches for block liquidity in parallel.

 

Both strategies are complete and do not have any auctions. All use cases are covered and kept simple. A simple and common architecture is used to create both of these Algos. The Algo has different parts with each having a unique and important function.

 

Algo Components

An Algorithm engine has 4 main components that are all linked to each other. These include:

 

Algo Engine

The main component of an Algo logic is the Also engine itself. Any interactions with the customers are done in the Algo engine. This includes:

• Dealing with orders
• Tracking shipments
• Making amendments
• Order Verification

 

Once that is done, the Algo engine goes further to create the Scheduler and Worker. With these in place, it makes sure that these two components are functioning as expected. Another function of the Also engine is to monitor and slice shares from auctions.

 

Scheduler

The Scheduler links quantitative models to the trading Strategy. The main thing that differentiates between the VWAP and PROOF is the type of Scheduler. Each Scheduler has three models; pre-trade, impact minimization, and dynamic volume prediction models.

 

The pre-trade model focuses on the number of shares to be traded over a certain period. The impact minimization model gives the user the speed at which the trading Strategy will work. This type of model is included in PROOF.

 

The final type, the dynamic volume prediction model shows the number of orders that the Algo will process in a single day. This is based on data collected in the past and during each day.

 

Worker

The Worker is the middle layer of the Algo Logic. The main function of the Worker is to deploy and regulate the routers, also known as intra-day trading tactics. Once it deploys them, the Worker will also reshuffle the Routers according to the Algo engine.

 

Routers

At the lower end of the Algo, logic is the Routers. These allocate orders to various predetermined locations. All orders are made at the same price for each level. Routers can switch to several sub-routers when reshuffling orders. Routers have the following functions:

• Passively adding liquidity through POST
• Removing Liquidity through taking
• Searching for new Opportunities for block liquidity through OPPO

 

OPPO searches for new opportunities by going through thousands of orders and shares.

 

Final Thoughts

Many managers may not understand how their trading strategies function. A trading Algo engine provides a more effective way of managing orders and risks. Because it is self-regulated, Algo can trace any bugs and prevent them from causing further damage.

 

The Algo logic has different components which are interconnected. The Also manages the other components and sends orders. The Scheduler connects the Algo to different quantitative models as orders are processed. The Worker then deploys the routers ensuring orders go to the appropriate locations. Algo is one of the most simple and promising trading strategies in the financial market. You can quickly improve your trading strategy and results.

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