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Algorithmic Trading: Is It Worth It? Indian Stock Market Hot Tips & Picks in Shares of India

As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. Past performance of securities/instruments is not indicative of their future performance. These stocks are trading at different prices in different markets. Traders deploy algo trading systems to profit from the difference. Algorithmic trading involves automated transactions to understand when investors enter and exit trades. The lack of human intervention saves time and increases the chances of traders generating more significant swings in market prices.

is algo trading profitable in india

The idea is to get people to learn to practice first and then to trade. These days there are some brokers who are opening up their trade engines to allow algorithmic trading. In the US, algo trading accounts for anywhere between percent of trading but then they have been doing it for decades. In India, this form for trading is picking up with more players and traders joining in every day. Though SEBI allowed algo trading in 2008, there were few brokers who were willing to invest in it thanks to the sub-prime crisis.

Algorithmic Trading Evolution in India

Computer-programming knowledge to program the required trading strategy, hired programmers, or pre-made trading software. Algorithmic trading improves these odds through better strategy design, testing, and execution. Because of the high-end technology and the benefits, algo trading is quite profitable. The extensive benefits of algo trading include high-speed trade execution, accuracy and the ability to perform the trades without the effect of human emotions. However, the SEBI has published some guidelines for automated trading to make trading fair and just for investors. Algorithmic Trading uses software to create an algorithm, which is a specific set of instructions that a computer has to follow with trading instructions.

is algo trading profitable in india

In 2008, a memorable circular, issued by SEBI – Securities and Exchange Board of India, stated that India was opening its markets to algorithmic trading. What DMA permitted brokers to do, was introduce their own infrastructure to their non-retail customers. Such customers were allowed to place trades powered by programmes called algorithms. Algorithmic trading in India, for the very first time, was undertaken with no intervention from human beings.

In 2008, SEBI allowed algo trading in India and by September 2009 we started iRageCapital which in those days was involved in Algorithmic Trading Consulting. With the rise in digitization driving the need for smart computer programs, algorithms are a part of everyone’s daily lives. These algos leverage previous patterns, data trends, and instructions for a user-specific application. Insurance, Mutual Funds, IPO, NBFC, and Merchant Banking etc. being offered by us through this website are not Exchange traded product//services. Share India group of companies is just acting as distributor/agent of Insurance, Mutual Funds and IPOs.


The ultimate aim is to minimize the market impact by executing an order close to the average price between the start and end times. In practice, high-volume traders use TWAP to execute their orders in smaller chunks when the market price is closer to TWAP, making the execution smooth. In this strategy, traders incorporate divided time slots between the start and end time to deploy algo trading systems.

  • With automated trading software, traders don’t need to continuously monitor live prices or graphs to place their orders manually.
  • With ShareIndia, you can trade seamlessly with its user-friendly cutting edge technology.
  • Algo-trading is not only legal in India, but it also accounts for nearly about 43% of the total trades executed on the National Stock Exchange .
  • Investors must learn algo trading before doing algorithmic trading with real money.

If the hypothesis is tested true it would mean that there is a scope for mean reverting and the stocks would come back. While making markets we have use all instruments to cover the position. The textbook definition of HFT would be a very high number of orders, high churn and high turnover. Initially, we offered turnkey solutions to a number of institutions in India and a few abroad.

Zerodha CEO Nithin Kamath on misconception around algo trading

Writing/ selling options or trading in option strategies based on tips, without basic knowledge & understanding of the product and its risks. The main reason is if you are trading a strategy which is profitable for you, you need to be able to increase the speed of execution for making the profitable trades happen quickly. It’s important to have trade at the price you set in the strategy. Short term traders and sell side participants benefit from automated trade execution; in addition, algorithmic-trading aids in creating sufficient liquidity for sellers in the market. Mid to long term investors or buy side firms who purchase stocks in large quantities but do not want to influence stocks prices with discrete, large-volume investments. An algorithm is a specific set of clearly defined instructions aimed to carry out a task or process.

These elements should be included directly into the system or easily incorporated from other sources. Algorithmic trading, sometimes called automated trading, black-box trading, or algo-trading, is the process of making a trade with a computer program that complies with a set of pre-programmed criteria. Even though the transaction is quite volatile, it might generate profits more often and quickly than a human trader could. We decided to start a program, ‘Executive program in Algorithmic Trading’ that taught statistics, knowledge of software and hardware and trading strategies.

But later we decided to start our own trading rather than just consulting. The orders placed are automatic and highly accurate without any human errors. Buy 100 shares of XYZ company if it goes above Rs 450 before 2 PM. We will be happy to have you on board as a blogger, if you have the knack for writing. Just drop in a mail at with a brief bio and we will get in touch with you. Drawing parallels to VWAP, this strategy aims to break big order volumes into smaller chunks.

This is the modeling part of the strategy where we create a strategy and test it out at the various scenario. Let’s assume we optimize it to taking a trading decision when the standard deviation is 2.5. We also do directional trading, but these trades are open for milliseconds. Using machine learning we have developed statistical models to create short-term predictions.

Since then, algo-trading has grown the number of trades executed on the Indian stock exchanges. Traders can optimize their strategies in the form of coding languages that a computer program can carry out. The speed of order execution, avoiding human emotions during trade, applying strategy to a broader range of stocks and tasks like bulk buying or selling can be done with the help of algorithmic trading. is algo trading profitable in india The entire premise of the question, is algo trading profitable, changes with respect to the retail investors. Although presently, there are no rules and regulations set for the retail investors to participate in algo trading, yet the retail investors are able to trade algorithmically in a profitable way. Some of the popular algorithmic trading platforms are Zerodha Streak, RoboTrade, eToro, etc.

How Does NSE Encourage Algo Trading in India?

A computer program accompanied by backtesting completes the need from an execution standpoint. For novice readers, delta neutral is a portfolio strategy that comprises of positions offsetting the positive and negative delta. Delta is the ratio that compares the change in the price of the asset to its corresponding derivative.

Algo-trading has become significantly popular among institutional investors and large trading firms since the early 1980s for a variety of purposes. According to the research, algo-trading is beneficial for large order sizes of nearly about 10% of the overall trading volume. Algo trading is a state-of-the-art technology that used computer programs called algorithms to make trades. If you are a stock trader, you might have heard about algo trading, which is gaining great popularity in recent times.

Using these two simple instructions, a computer program will automatically monitor the stock price and place the buy and sell orders when the defined conditions are met. The trader no longer needs to monitor live prices and graphs or put in the orders manually. The algorithmic trading system does this automatically by correctly identifying the trading opportunity. In a growing market like India, there is a lot of interest among Indian retail investors to trade algorithmically. There is so much buzz around the markets these days that everybody wants to know more about it and explore it in some form or the other.

Algorithmic traders often make use of high-frequency trading technology, which can enable a firm to make tens of thousands of trades per second. Algorithmic trading can be used in a wide variety of situations including order execution, arbitrage, and trend trading strategies. The volume of trades and the opportunities to earn profits are very high and they can be capitalised to make algo trading profitable. When investors trade manually, they’re relying on gut instinct — if they have a feeling about something, it’s easy to buy or sell based on that hunch alone. A lot of traders get lucky and catch the winning trades , but many times they don’t get lucky enough or make the right decisions at the right time.

However, until now, this aspect of trading was the privilege of a selected few. Algo-trading is not only legal in India, but it also accounts for nearly about 43% of the total trades executed on the National Stock Exchange . In the year 2008, the Securities and Exchange Board of India had allowed algo trading for the institutional investors.