As the demand for algo trading has grown, the markets regulator has suggested reexamining the structure to improve the system’s checks and balances. Few people understand the intricacies of this institutional investor-dominated trading system, even though ordinary investors have been experimenting with algorithms.
In algo trading, pre-programmed computer programs make several deals in milliseconds. To avoid suffering large losses, retail investors should first employ only algorithms that have been approved by the stock exchange and install protections like exposure limits and stop-loss. Even if a trade is automated, they should monitor it to avoid over-leveraging.
To register with the exchange, an algorithm must adhere to tagging, audit trails, and other standards. Brokers give users safe access to APIs and the tools they need to test and implement algorithms.
Investors must comprehend the algorithm’s reasoning and not naively rely on pre-made solutions. The secret to safe algo trading is keeping abreast of regulatory requirements and making sure the platform complies with SEBI norms.
Quant mutual funds can be a great substitute for regular investors who lack the knowledge necessary to handle algo trading on their own. Under stringent regulatory supervision, these professionally managed funds offer exposure to algorithm-driven strategies. These funds lessen the difficulties and risks associated with independently managing algo trading while offering exposure to advanced trading strategies.
Investors can profit from data-driven strategies with quant funds without having to learn or use algorithms. Compared to managing algo trades directly, quant funds offer a safer and more convenient option for individuals seeking a less involved approach to quantitative investing. They provide risk management and diversification while lowering operational complexity.
