The alpha preserving algorithms are used whenever the investor has reached the decision on trading through the fundamental analysis or through any other means and he is about to execute the decision. By definition, the alpha preserving algorithms are something that deals with the reduction of market impact and it minimizes the slippage during the execution of the trading strategy that was chosen. A simple example of the alpha preserving algorithm is cutting down a large order into smaller chunks and then these smaller orders are executed. This article will discuss on how to accommodate the alpha preserving algorithms.
Dealing with the increased flow of transaction
The increase in the flow of order which is a result of chunking the large order into smaller ones will not usually have any performance problem in significant. But it will obviously reflect in increased number of trades. It is not true that this increased trade will affect the trading performance. But, it will definitely have an effect on simplifying the trade billing methods. Especially the charges that are made for each trade cannot be simplified easily. It is very important that any organization that is clearing trades must have to deal with the increased trade volumes. A simple way to do this is performing trade netting. The trade netting will reduce a large trade numbers that a market participant or an organization has to deal with their back office applications.
Dealing with decreased liquidity
One of the major reasons behind the slippage is the non optimized transparency of market. Some ways to encourage the order entry or listed below
All the above mentioned ways have one thing in common. It is nothing but the theory of non transparency, which is booked in turn to the increase in the resident liquidity. From the perspective of the market place, it is must to provide an enough functionality that facilitates the market transparency.
On practical, the above mentioned ideas about the alpha preserving algorithm may differ. But the conceptual ideas of the alpha preserving algorithm are same as what has been explained in this article. People who are interested in algorithmic trading can learn more on this by taking a right algorithmic trading program that is available in some best algorithmic trading institutes. Some best institutes will provide a global exposure to their students. Many algorithmic trading institutes are also offering the jobs in algorithmic trading for the deserving candidates.
Dealing with the increased flow of transaction
The increase in the flow of order which is a result of chunking the large order into smaller ones will not usually have any performance problem in significant. But it will obviously reflect in increased number of trades. It is not true that this increased trade will affect the trading performance. But, it will definitely have an effect on simplifying the trade billing methods. Especially the charges that are made for each trade cannot be simplified easily. It is very important that any organization that is clearing trades must have to deal with the increased trade volumes. A simple way to do this is performing trade netting. The trade netting will reduce a large trade numbers that a market participant or an organization has to deal with their back office applications.
Dealing with decreased liquidity
One of the major reasons behind the slippage is the non optimized transparency of market. Some ways to encourage the order entry or listed below
- Iceberg Orders: It is a classical market place implementation of the alpha preserving algorithm. The implementation of the iceberg order is quite standardized one. But still, some sophisticated variations will occur.
- Dark Orders: The dark orders are nothing but the non transparent orders. This will avoid the marketers to protect their trading from being exposed to other marketers. But the worst part is that, the person who places the dark orders himself cannot see the orders and its values.
- Delayed publication of the large trades is another way to encourage the order entry.
All the above mentioned ways have one thing in common. It is nothing but the theory of non transparency, which is booked in turn to the increase in the resident liquidity. From the perspective of the market place, it is must to provide an enough functionality that facilitates the market transparency.
On practical, the above mentioned ideas about the alpha preserving algorithm may differ. But the conceptual ideas of the alpha preserving algorithm are same as what has been explained in this article. People who are interested in algorithmic trading can learn more on this by taking a right algorithmic trading program that is available in some best algorithmic trading institutes. Some best institutes will provide a global exposure to their students. Many algorithmic trading institutes are also offering the jobs in algorithmic trading for the deserving candidates.