Home Finance 3 Algorithmic Trading Strategies You Should Know About

3 Algorithmic Trading Strategies You Should Know About

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Algorithmic trading is considered to be the most advanced form of trading. In this form of trading, https://forexrobotexpert.com/algorithmic-trading-strategies/ are used for the entire trading process. The main advantage of this type of trading is that it is more result-oriented.

To define it in simple words, algo-trading is done with the help of computers that are predefined with a particular set of instructions. The computer excites the trade based on the algorithm. In this post, we will tell you about three of the most popular algo-trading strategies.

Algo-Trading Strategies

Here are three of the most common algo-trading strategies you should know about.

  • Momentum And Trend-Based Strategy

This is the simplest and most commonly used strategy. It is based on the momentum and trends in the market. The technical indicators like price value and averages are monitored and studied to buy and sell. The trade is carried out automatically as soon as the required set of conditions are fulfilled.

  • Arbitrage Strategy

The next commonly used strategy is the arbitrage strategy. Arbitrage opportunities exist whenever there is a price difference in the securities. This strategy takes advantage of arbitrage opportunities by using powerful computers. This makes it easier to identify opportunities quickly. When a stock exchange is listed at a higher price on one exchange and lower on the other, the algorithm identifies the opportunity quickly.

  • Mean Reversion Strategy

The third strategy is the mean reversion strategy which is based on the prices of security that it may increase or decrease. However, they do come back to an average value at some point in time. This strategy is also called the counter-trend strategy and is widely used by traders. This helps in finding the lower and higher price limit of the stock. The algorithm functions to execute orders when the price shifts beyond the normal range. The average price is calculated based on the previous data of security. It executes a trade that at some point the prices will come back to the average point. In other words, if the prices are high, then it will come down and vice versa.

Algo-trading strategies are complicated strategies. If you are new in the trading biz, then you need to first learn the basics of it. Unless you do so, it will be hard for you to use the right strategy at the right time and place.

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