Every strategies that are followed in algorithmic trading now are only some identified opportunities for cost reduction or improved earnings. Some of the identified strategies are listed below
1. Trend following strategies
One of the most common algorithmic trading strategies found in the market is the trend following strategies. The changes in trends like channel breakouts, moving averages and also some indicators that are related to the technical side of the market. These type of strategies are very easy to implement and use in the market because they do not involve in any prediction of values.
2. Arbitrage opportunities
This is another type of strategies that is being followed by many marketers now. The marketer will buy an asset in one market at a lower price and will sell the same asset in another market for highest price. Thus the strategy offers a risk free trading with a good profit.
3. Index fund rebalancing
This defines a period in which the rebalancing of holdings occurs. The holdings will be brought on par with the indices of the benchmark. This strategy will be creating a profitable opportunity for the marketers. Thus it is being in practice at various markets now.
4. Volume weighted average price
This is a strategy in which the larger orders are being cut down into smaller chunks are being processed. The aim of this strategy is to have a benefit of the average price.
Some non functional requirements of algorithmic trading
- Scalability: it is the ability of software to work under increased workload. An AT must be scalable in accordance with number of data feeds in the process.
- Performance: it is the ability of software to accomplish the work compared with the resource and time required to do the work.
- Modifiability : it is the ease of change of system based on requirements
- Reliability: it is about the dependability and accuracy of the work done by the system.
- Auditability: it is the ease of auditing the system. Auditability from financial, IT point and compliance is must.
- Fault tolerance: it is the ability of the system to work even after a fault or failure in it.
- Interoperability: it is the case in which the system can work with a range of systems related with each other.