Learn Algorithmic Trading: A Step by Step Guide

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Step by Step Guide to Learn Algorithmic Trading

With the boom in technological advancements in trading and financial market applications, algorithmic trading and high frequency trading is being welcomed and accepted by exchanges all over the world. Within a decade, it is the most common way of trading in the developed markets and rapidly spreading in the developing economies.

How to get into the Automated Trading industry?

In the past, entry into algorithmic trading firms used to be restricted to PhDs in Physics, Mathematics or Engineering Sciences, who could build sophisticated quant models for trading. However, with the growth and demand of the industry for the quant traders and developers has synced with the growth of online education industry. It is now possible to get into this domain without having to go through 8-10 years long academic route.

Step 1: Acquire knowledge in three core areas

Algorithmic trading is a multi-disciplinary field which requires knowledge in three domains, namely,

  • Quantitative Analysis/Modeling
  • Trading Knowledge
  • Programming Skills

Quantitative Analysis

If you are a trader who is used to trade using fundamental and technical analysis, you would need to shift gears to start thinking quantitatively. Working on statistics, time-series analysis, statistical packages such as Matlab, R should be your favorite activities. Exploring historical data from exchanges and designing new trading strategies should excite you. There are many courses available online to hone your basic statistics knowledge and to learn basic R.

Trading Knowledge

If you’re a professional coder/developer and have a background in programming, it is essential for you to acquire all the fundamental knowledge about financial markets such as different types of trading instruments: stocks, options, futures, commodities, currencies etc, different types of strategies such as trend following or mean reversal, low frequency strategies, arbitrage opportunities, options pricing models, risk management. Even if you are looking for a hard core developer role in the trading firm, this knowledge would be crucial for you to do well at your job and climb the success ladder.

Programming Skills

If you want to excel in the technology driven domain of Automated trading, you should be willing to learn new skills and don’t form averse to any field. So if you have never printed “hello world” by compiling your own coding program, it’s time to download the compiler of your interest – C++/Java/Python/Ruby and start doing it! The best way to learn programming is to practice, practice and practice.

programming learner stages

Stages of a programming career!

Step 2: Strengthen your knowledge by reading books

To hone your knowledge in Options, Futures, and Derivatives, a good idea is to read up John C Hull. There are a few books online which will give you a complete overview of this domain such as Algorithmic Trading and DMA: An Introduction to Direct Access Trading Strategies by Barry Johnson and High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems by Irene Aldridge. These books will help you get started in this domain.

quant booksTo actually start doing algorithmic trading, it is a good idea to find about the courses which give you hands-on experience on designing the trading strategies and implementing them through advanced algorithmic trading platforms. You would find it very difficult to find books and material which can teach you back testing and optimization techniques hands-on. You will find very few if any, advanced algorithmic trading strategies being explained on the internet or print material.

Step 3: Learn from Professionals/Experts/Market Practitioners

The building blocks in learning Algorithmic trading are Statistics, Matlab/R, and programming languages. It becomes necessary to learn from the experiences of market practitioners, which you can do only by implementing strategies practically along-side them. You can join any organization as a trainee or intern to get familiarize with their work ethics and market best practices. If it’s not possible for you to join any such organization then you can opt for online courses. There are online learning portals such as QuantInsti, Coursera, Udemy, Udacity, DataCamp, & Open Intro, they have expert faculty from financial markets who share their experiences and tactics with you during the course.

You can join some of the courses available online for free and work on your pace if you want to explore this domain. Trying out these courses will give you a strong foundation which will be required when you design the strategies and learn to back test and optimize them.

There are a few courses which industry and academia have offered for those who are interested in building expertise in this field. Most of such courses are delivered in the format of 2 days –to2 weeks long workshops or as part of Financial Engineering degree programs. Keeping in mind the need for an online program for working professionals, a comprehensive hands-on course is being offered by QuantInsti which is a pioneer institute in Asia offering programs in Algorithmic & High-Frequency Trading.

The algorithmic trading course, Executive Programme in Algorithmic Trading covers all the key aspects of algorithmic trading and offers project work for practical experience at the end of the course. The 100 hours of course-work and 3 more months of project work will give you an accelerated learning experience. There is an entrance test as the part of the admission process to join a new batch which starts in every alternate month. The most important aspect of this course is that it is being offered by Industry experts who have consulted banks, institutions and exchanges all over the world. What can be better than learning the tricks of the game from the game keepers!

So, if you wish to master this new domain and more importantly make it profitable for your trades, start learning today!

To know more details about our financial markets trading courses, get in touch with us by filling this contact form or call us at +91 (022) 61691400.

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One thought on “Learn Algorithmic Trading: A Step by Step Guide

  1. September 10, 2016

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