Algorithmic Trading

ALGORITHMIC TRADING

There are essentially three types of algorithmic trading:

  • Low Frequency Trading : transactions occur at intervals of days, weeks or even months
  • Intra-day Trading: transactions occur a few times within a day
  • High Frequency Trading (HFT): transactions occur many times within a fraction of seconds

HFT is carried out using high power computers that follow complex algorithms to analyse multiple markets and execute trades based on market conditions. This originated because of various advantages in HFT; it relies solely on price movement and market making processes and it is a faster mechanism to make potential positive returns. Specialized financial institutions develop proprietary algorithms and execute orders on the same. Neuraltechsoft helps such clients by validating their models for:

  • Back testing
  • Robustness
  • Model validation
  • Checking outcomes in desired scenarios
  • Stress testing

We ensure that the algorithms used by our clients have been thoroughly tested and are accurately implemented. Our expertise ranges across various exchanged at the international level.

We specialize in Intra-day trading with different strategies in both Stocks and Derivatives. The strategies we develop are deployable across exchanges in International level. Presently we are active in NYSE, LSE, TSE and NSE.

Our portfolio of Algorithmic trading strategies include Pair Trading, Delta Neutral Strategy and Mean Reversion Strategies.

Pair Trading

Pair Trading is ideally a Market Neutral strategy which takes advantage of short lived discrepancy between the prices of two close substitutes.The strategy works well regardless of the market direction. The same theory could also be extended to form a portfolio of stocks of size greater than two which leads to diversification and hence reduction of risk.

Delta Neutral Strategy

Delta measures how much an option’s price changes when the underlying security’s price changes. A delta-neutral portfolio balances the response to market movements for a certain range to bring the net change of the position to zero. The portfolio makes money when the Implied Volatility of the underlying asset declines.

Mean Reversion

The general idea for this strategy is that the high and low prices of the stocks are temporary and the stock’s prices in a long run tends to have an average price. This strategy involves identifying stocks or other securities whose recent performance has differed greatly from their historic performance.