Algorithmic trading (or automated trading) is a trading strategy, which promises to be faster and more accurate than a human trader.
Many institutions have found algorithmic trading to deliver that potential. One of the most common ways is momentum-based algos. When there is a rise in volatility, momentum-based algos kick in with buy or sell orders and a stop-loss, until the momentum hits a resistance level. Algos deployed in S&P 500 Emini (ES) are a typical example of this.High-frequency trading (HFT) is another form of algorithmic trading involving thousands of trade orders at blazing fast speed. It strives to make small profits on many trades as the markets move, often capturing arbitrage opportunities across different markets.
Many financial institutions rely on algorithmic trading to increase revenue and reduce operational costs. More recently, AI has been driving the adoption of Algorithmic trading using Machine Learning techniques. A recent NVIDIA survey of financial services professionals found that 8 in 10 respondents believe AI is conducive to their company's sustainable success. According to the survey, 'State of AI in Financial Services' 3 in 10 think that AI will enhance their company's annual revenue by at least 20%.
But we’re still in the early ages of algorithmic trading, when the immense future potential is taken into account. Algorithmic trading is expected to grow by $3.79bn during 2021-2025, totalling a CAGR of almost 6%, according to Global Algorithmic Trading Market 2021-2025.
In the previous monitored period of 2016-2020, trading algorithms accounted for about 90% of all public trading, according to the Global Algorithmic Trading Market 2016–2020 report.
What are the benefits of algorithmic trading?
The benefits of automating tasks through the use of computers are similar across all sectors: higher precision, more speed, and reduced head-counts. In financial trade specifically, that translates into immediate order placements that catch the most profitable price levels, while taking into account various market dynamics. These dynamics include the current state of play in the market as well as historical data.
Another benefit of Algorithmic Trading is perhaps the most obvious aspect that separates a human mind. As any budding trader will know, and as researchers will tell you, a lot of mistakes in trading are due to human psychology and emotions that interfere with rational decisions. Algorithmic trading eliminates those risks as there is no possibility of the algorithm being influenced by emotions.
How can BSI help my business in algorithmic trading?
Business Systems International (BSI) supply custom solutions for Algorithmic trading, ranging from individual systems for High Frequency Trading, through to complete AI Machine Learning environments, hosted in the Nordics.
Working closely with leading GPU manufacturer Nvidia, BSI has deployed thousands of GPUs for financial trading. BSI continues to be the leading Nvidia provider for AI driven solutions in finance.
To effectively run algorithmic trading on a system, you need the highest performing hardware. BSI offers various types of AI optimised servers running on GPUs, which can all be configured to your exact specifications. You can find out more information on these solutions here or by getting in touch on +44 207 352 7007.
This article was provided by our AI researcher Ekin Genç.
To learn more...
Our AI technology solutions can be viewed here and our AI inception programme here.
Get in touch to discover how we could optimise your business with AI.