The algorithms are widely used in various levels of trade cycle. We can classify the algorithms based on the stages of trade cycle on which it is being used. There are about three stages of trade cycle in which the algorithms are widely used. Those stages are the pre trade analytics, execution stage and the post trade analytics. This article is mainly to concentrate on these three stages of trade cycle and will discuss on how the algorithms are being used in these stages of trade cycle.
Pre trade analytics
This stage will involve the historical data analysis and also the volume data and the current price. This will help the clients to determine the destiny for the order to send and also will help in determining the right time to send the orders. Also this stage will give a clear idea to the clients to determine whether the order has to be manually handled or an algorithm must be used. This is a stage that was mainly designed with an idea of aiding the buy side traders. This stage will help them to understand the aggressiveness of the trade and will let them minimize it by determining the time horizon.
Execution stage
This is a stage in which the clients are allowed to create their own stock list and they are allowed to choose the best strategy. The strategy can be either an implementation shortfall or something like ‘enter the start and end time’. The traders have an advantage of monitoring the trade and the algorithm in the real time. Also they can make any changes in the trade or algorithmic parameters, in case if the trade is moving far from the right destiny. The added value is that the users can now filter the portfolios by market cap, sector, volume percentage, per share loss or profit, basket and exchange.
Post trade analytics
This is a stage in which the commission for the trade is tracked. Also this will help in exposing the total cost that was involved in the whole trade cycle. All the cost that was hidden during the course of executing the trade will be reveled in the post trade analytics. This analytics is particularly meant for improving the quality of the execution and to facilitate the decisions that are made on investment by the clients. The one most efficient and easy to handle trade benchmark which is widely used in currently is the VWAP.
But in case of the VWAP, it just provides the comparative results and it cannot be used for evaluating the strategies that are meant for doing something else. Usually the strategies will follow the midpoint of the market. If not, then that cannot be evaluated by the VWAP. People who are interested in algorithmic trading can learn more on this by taking a right algorithmic trading programs in Singapore that is available in some best learn algorithmic trading in Singapore. Some best institutes will provide a global exposure to their students.
Pre trade analytics
This stage will involve the historical data analysis and also the volume data and the current price. This will help the clients to determine the destiny for the order to send and also will help in determining the right time to send the orders. Also this stage will give a clear idea to the clients to determine whether the order has to be manually handled or an algorithm must be used. This is a stage that was mainly designed with an idea of aiding the buy side traders. This stage will help them to understand the aggressiveness of the trade and will let them minimize it by determining the time horizon.
Execution stage
This is a stage in which the clients are allowed to create their own stock list and they are allowed to choose the best strategy. The strategy can be either an implementation shortfall or something like ‘enter the start and end time’. The traders have an advantage of monitoring the trade and the algorithm in the real time. Also they can make any changes in the trade or algorithmic parameters, in case if the trade is moving far from the right destiny. The added value is that the users can now filter the portfolios by market cap, sector, volume percentage, per share loss or profit, basket and exchange.
Post trade analytics
This is a stage in which the commission for the trade is tracked. Also this will help in exposing the total cost that was involved in the whole trade cycle. All the cost that was hidden during the course of executing the trade will be reveled in the post trade analytics. This analytics is particularly meant for improving the quality of the execution and to facilitate the decisions that are made on investment by the clients. The one most efficient and easy to handle trade benchmark which is widely used in currently is the VWAP.
But in case of the VWAP, it just provides the comparative results and it cannot be used for evaluating the strategies that are meant for doing something else. Usually the strategies will follow the midpoint of the market. If not, then that cannot be evaluated by the VWAP. People who are interested in algorithmic trading can learn more on this by taking a right algorithmic trading programs in Singapore that is available in some best learn algorithmic trading in Singapore. Some best institutes will provide a global exposure to their students.