Algo Trading (sometimes also known as “algorithmic trading”, "program trading”, "robot trading” or “auto trading”) is a method of trading in financial markets that uses mathematical models to make transaction decisions. These models seek to generate maximum profits by incorporating the user’s own strict rules concerning the optimal time and price for placing an order. They are mainly used by advanced, serious retail institutional traders, and their effectiveness can be quantified by using historical data to conduct back-testing.
Steps for Developing Algo Trade Strategies
1. Collect Market Data
Collect sufficient historical data for back-testing
2. Build Strategies
Building the criteria of the trade strategies
3. Script Writing(Coding)
Conversion of trade strategies into comupter language
4. Back-testing
Back-testing by historical data
5. Optimization
Find out the best variables for the strategies
6. Forward-testing/Simulation
Simulation trading on live envrionment
7. Order Execution
Live trading by Algo