11 basic Terms to Know About Algorithmic Trading

Algorithmic trading is a new mechanism that enables the investor to trade tools and software that are mathematically backed and sound in exploring new trade methodology with human involvement close to minimal. It helps in spotting the correct and appropriate trade strategy and also helps in making the least human effort possible.

Algorithmic Trading

Algorithmic trading is also popular by the terms of algo trading, black box trading, etc.

Some of the most basic terms used are in Algorithmic trading are-

#1. Trend following is a tool that is often used in algo trading which analyzes various trends in the market which are generally short-term, medium-term and long-term. Then based on these trends, makes a rational investment decision on a particular stock. The strategic advantage is it takes investment decisions on various kind of trends and it helps in making profits.

#2. Direct market access (DMA) is a tool which gives direct access to the investor to view where his money is going and the broker has the authority to give direct access to his client. Here the client has straight access to the brokers’ screen.

#3. Market-making: High-Frequency Trading firms especially have thrived as market makers in securities markets. This means that they stand ready to buy and sell securities using their own money in order to keep the market liquid and in order.

#4. Arbitrage Strategy: An arbitrage strategy refers to the trading opportunity that exists due to price differential in various stock markets, for example, buying an instrument in one market and simultaneously selling a similar instrument in another market and thereby making a profit.

#5. Low Latency Trading: Low-latency traders depend on ultra-low latency networks. They provide information to their counterpart traders much faster and in an efficient manner than the respective competitors in order to make money in microseconds. Enhanced advances in speed have led to the need for firms to have a real-time, collocated trading platform to benefit from implementing high-frequency strategies.

#6. Spread: The spread refers to a difference between the bid-ask spread which is known as the cost of trading. The difference in price in which you buy is the profit or loss for the trader who is looking to make a profit on the margin of the bid-ask spread.

#7. Volume Weighted Average Price: This is widely used due to its randomness which follows the past historical trend of the market in order to place the order which is close and the nearest to Volume Average Weighted Price (VWAP).

#8. Target Close: The Target Close strategy manages the market impact of the order on the closing price by defining the strategy’s optimal start time based on past trading trend and the prevailing stock market conditions.

#9. Dark pools: Dark pools are trading systems where there is no pre-trade transparency of orders in the system that is no price is shown in the system and also the volumes are not revealed. Dark pools can be split into two types which is crossing networks and trading venues which are regulated markets, for example, MTF’s.

#10. Trading volume:  The traded volume of a security in a given period of time is a quite important measure for the liquidity of a security. Trading volume in the trading period is of importance and has to be forecast. Therefore, empirical studies of the trading volume are necessary.

#11. High-frequency trading: High frequency refers to the kind of electronic trading tool or engine that is often characterised by holding positions very briefly in order to take advantage of short-term opportunities in terms of price rise and price fall.

Ankit is a financial markets expert, having worked in financial markets for more than 11 years. He regularly writes at www.FinMarketGuru.com which is the fastest growing platform for latest financial markets updates from across the world.


A Complete Guide to Student Debt

Student Debt is a form of debt, which is generally withdrawn for paying all the educational expenses. The rapidly rising tuition costs have made the students to take a shelter under the roof of Student Debt. Students also take a debt to meet all their needs other than their purpose of the study.

student loan debt facts

Reasons for Taking a Debt?

Multiple reasons might work behind when one decides to take a debt. The main reasons for a student to take a debt may include-

  • The constant growing cost of college and tuition fees has only left the way of taking a debt to the students.
  • The low-interest rate of student loan has enabled the aspiring students to fulfil their dreams by taking a debt from the bank.
  • Another positive side of taking a debt is that financially weak students can also pursue their studies without having any further hassle.
  • There is a need for the students to understand that he or she is not alone, who are taking the help of a debt to finish their studies.

In spite of all the above-mentioned reasons, there might be other reasons too. A student can also opt for taking a debt to fulfill his personal needs.

Types of Debt a Student can Go for:-

Among all the available options of taking a debt, pupil generally go for the Student Debt. This type of debt is well known for paying all the costs of the educational field of a student. It has opened a new path for the students to pursue their study without any further interruption regarding the monetary issues.

Besides taking a loan to finish the study, students can also take a loan to meet all the other priorities. The regular areas of taking a debt may include car loan, home loan, etc.         

How to Resist the Temptation of too much Credit?

Student life is a time when one has to manage all the expenses on a very low income. Thus, taking refuge to student loans are the only valid option, which remains to a student. This loan might appear as a boon in the lives of the students to cover all their living costs. The way of resisting a student loan is not at all easy, but finding a substitute is also very essential. You can opt for indulging in a part-time work to meet all the needs.

The positive aspect of student loan is that the payment will not start until your salary package reaches to a certain amount. Try to avoid the usage of credit cards as it might become the reason for a headache. When the credit limit will surpass a certain amount, it will definitely become one of the toughest jobs for the students to repay it.

Why should a Student Avoid Taking a Loan?

Despite the existing reasons to take a debt, there are also some compelling grounds for you to understand that why you need to avoid it.

  • The time period of becoming a graduate may vary from one student to the other. So, there might be a confusion regarding the exact time of starting the repayment.
  • You probably would not able to go for another loan, even if you want to. Depending upon your Credit History, the bank might refuse to provide you with another loan.
  • The way to get rid of a student loan is very critical as it will not go away even if you file for bankruptcy.

Thus, you need to avoid taking such a loan, which might end up creating a trouble.

Effective Ways to Repay your Debt:-

Already under the pressure of repaying a debt? Trying to find out some easy ways to make the path easier? Here are some effective ways to repay your student loan faster.

  • Treat the loan like a mortgage and try to make large payments for cutting the principle quickly.
  • Try to make a plan of the monthly payment you need to pay and work according to that.
  • Set up an account, which will only be used for paying back the college debt of yours.

Taking a debt to meet all the educational needs might be one of the best available options for a student. But, there is a need for the students to check all the options and required time to repay the debt.

With the help of the above-mentioned information, it would be easier for you to discover the positive as well as the negative aspects of taking a student debt.