From A Commodity Analyst To An Algorithmic Trader

From A Commodity Analyst To An Algorithmic Trader

Managing research work for commodities involves a day-to-day understanding and charting of the fluctuations in commodity prices. Considering the data that a research analyst pulls and manages every day, it is quite plausible that a commodity analyst is either a trader already and if not he would be keen to start. A few years back trading commodities was not heard of much. Today the scenario is quite different; there are overall nineteen commodity centric exchanges in India and we see a good surge in commodity trading. The price fluctuation may not be drastic when considering commodities, but consider being able to apply intraday trading to the same. If you take a look at the charts representing price fluctuations for gold, you will observe a minute price variation on an hourly basis and a substantial one for a longer period. Consider, being able to leverage these minute fluctuations and monetize them for yourself.

gold price graph

Source: http://www.moneycontrol.com/commodity/gold-price.html

The question that needs to be answered is how would you be able to monetize this price variation? Have you ever thought of trading via Algos? A yes would mean you are aware of the technical requirement. If the answer is no, let us take you through the basics of algorithmic trading first.

What is Algo trading?

Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader.

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How does Algo Trading function?

Automated or Algorithmic trading is using computer programmes to generate trading signals, send orders and manage portfolios. Sophisticated electronic markets/platforms are used by the algorithms to trade in the similar fashion as done in electronic trading. The difference is that in algorithmic trading decisions about volume or size, timing and price are determined by the algorithm.

High-Frequency Trading (HFT) is a special category of algorithmic trading characterized by unusually brief position-holding periods, low-latency response times, and high trading volumes in a day. Algorithms are written so as to utilize trading opportunities which appear in very brief time periods as short as milli or microseconds. The margin of each trade is small, which is compensated by high speed and large volumes.

Why go for Algo-trading?

Consider being able to minimize your losses to a minimum by automating the buying and selling process. Accuracy and speed of transaction are increased manifolds, increasing your profit margin in turn. Your comfort level is increased because you don’t have to fret about the prices of your trade falling or skyrocketing while you sleep. You can backtest your strategies on historical data to be more secure, hence adhering to better risk management. All of that with an additional advantage of emotional discipline while trading and at the best possible speed. All you would need to do is automate them.

Here we have an example of a person who comes from the commodities market and is making the use of technology by having learned algorithmic trading. Mr. Vippinraj presently working as Regional Head -South for Reliance Commodities Limited, prior to that worked for Motilal Oswal in Commodity segment.

When he opted to go for the Executive Program in Algorithmic Trading™ from QuantInsti®, he was aware of the functionalities of the market and had acquired a strong aptitude towards trading. Read on to know more about his experience.

Our conversation with Vippinraj

What is your educational/professional background and how long have you been trading?

I started my career in International markets. I have been trading in global markets since 2001. The zeal and passion in financial markets made me take up a job in the same sector, which further honed my skills in technical and fundamental analysis.

Usage of various software’s like Bloomberg, Thomson Reuters, eSignal, Telequote, MT4 etc. have helped me in understanding the nuances of domestic and global markets.

Post my MBA in Finance I was offered a position in Motilal Oswal – Commodities, which provided me an opportunity to get an insight into domestic markets. I am currently associated with Reliance Commodities from past 11 years and currently managing South India as Regional Head (Commodities & Currency segments). With an overall experience of 14 years in financial markets, I have had an opportunity of working in various dimensions like Research, Business management, and development, Client management, Consultancy services, physical disposal services, etc.

How did you get interested in Algorithmic Trading & why QuantInsti®? How has been your experience so far?

The development and changes in the current trends and revolutionary machine trade practices I have seen around me inspired me to take up training in Algorithmic trading. Friends in the trading industry suggested QuantInsti® to me and I spontaneously contacted them for further details.

After talking to people at QuantInsti®, I realized it is the best place to learn Algorithmic trading. I received lectures from esteemed faculty of QuantInsti®, who in turn inspired me to complete the course. They were always delighted to answer my queries and were available for help at any time.

For a person who has market knowledge but not coding, learning algorithmic trading was a bit difficult. However, as they say when you have zeal and passion to achieve your goal nothing is impossible. And so, I went ahead and took over my fear of coding with the help of the brilliant faculty of QuantInsti®. After the completion of my EPAT training with QuantInsti®, I now have gained the knowledge and confidence in writing strategies using Python, R, and Matlab.

So far, it has been a great journey with QuantInsti® and I have liked it thoroughly.

How has EPAT™ changed your trading practice?

Manual trading had several drawbacks like emotional trading, strategies based on technical indicators and biases, all of which lead to improper trading decisions and caused errors which in turn affected the trading performance.

Learning algo trading helped me gain confidence and I can use my skill set to prepare strategies that can analyze markets and get best results. Using quants for back testing the strategies helps understand the effectiveness and accuracy of the trading system.

What did you find the curriculum of EPAT™ and how can it add value to your career?

EPAT, designed by QuantInsti®, is one of the best courses, which includes every detail from basics of trading to automated technology. The curriculum of the course is detailed and the availability of faculty from across the globe has helped us gain knowledge of both theoretical and practical approaches. The online portal was user-friendly and helped us interact with other enthusiasts across the world.

With EPAT my dream of setting up a trading desk has just been made easy. Now I can establish an automated trading desk anytime and enhance the quality of service to my clients. It is definitely a boon to my career which enables me to look at the trading system as a whole and take unbiased decisions while using automated trading methods.

What do you have to say about the placement opportunities provided by QuantInsti®?

QuantInsti®’s placement team has been very proactive in providing me with various profiles till now.

Would you recommend QuantInsti® to others who wish to pursue a career in Algo trading?

Yes definitely, I would recommend QuantInsti® to people who are passionate about learning and becoming a Quant. In fact, I have already referred a few of my colleagues and friends from trading industry to take up EPAT as it will help them to go to the next level.

 

Next Step

Are you keen to learn various aspects of Algorithmic trading to enhance your existing skill set or to start trading on your own? Check out the Executive Programme in Algorithmic Trading (EPAT). The course covers training modules like Statistics & Econometrics, Financial Computing & Technology, and Algorithmic & Quantitative Trading. EPAT™ equips you with the required skill sets to be a successful trader. Enroll now to begin your career in Algorithmic Trading.