Algo/Automated Trading Primer

#21
I have some questions?

where are you hosting your algo trading scripts? Is it in cloud, server or your own computer?

What trading strategies are you using technical, fundamental or quant methods?

So its on our servers, which are co located in the exchange data centre. The testing and writing of a strategy happens on our local machines.

Regarding trading strategies , Right now, we are using technical and quant methods. There are other firms out there which have forayed into Machine Learning and AI driven strategies.
 

TradeOptions

Well-Known Member
#22
As i said earlier , i am not into HFT. Execution is a big part of HFT , thats why all the HFT firms have some sort of execution Algorithms to execute their trade. So for simplification purposes , we can break down our Algorithms in 2 parts.
1. Strategy/Logic Algorithm
2. Execution Algorithm

If you are into HFT or scalping then you require execution Algorithm, If you are into Mid Frequency or Low Frequency Trading then Execution Algorithms dont matter.

I usually trade with market orders although there are strategies which trade on limit order as well. Usually There is a hybrid of order types which you can use. e.g. if you are trading a breakout strategy , you can enter in your position with a Market Order and while exiting it end of the day (Intraday)
you can use a limit order.

We also use this tool which converts our limit orders to market orders if they are unfullfilled after a set amount of time which can be adjusted. (like 10 seconds).

Frankly if you are trading the indices , e.g. Nifty or Banknifty, the slippage is not an issue. My analysis on at least 6 months of data on our systems suggest that we are paying a slippage of roughly 1000 rupees per crore if we trade market orders. Now for an HFT thats big, but for mid frequency traders thats actually inconsequential. Please note that thats an average, I have seen huge slippages on days like RBI policy meet etc, and i have seen days with positive slippage also. It evens out in the long Run.

So how is this slippage related to strategy development?
So it seems unless we make execution algorithms of our own, we cant actually control our slippage. Slippage is a factor of many things like
trading time, liquidity in the market, market depth etc. all of which we cant control. So the right thing to do here is take slippage into account while testing a trading strategy. Infact i recommend to over estimate your slippage and put that as a cost in your trading strategy while you are backtesting it.

If you are an institution , you may want to foray into developing execution algorithms but if you are a stand alone trader, forget about slippage, Use market orders, and put that slippage in your cost while designing a strategy.

Hope that answers your questions.
Thank you Big Short, Excellent Points :clap:
 

TradeOptions

Well-Known Member
#23
So its on our servers, which are co located in the exchange data centre. The testing and writing of a strategy happens on our local machines.

Regarding trading strategies , Right now, we are using technical and quant methods. There are other firms out there which have forayed into Machine Learning and AI driven strategies.
Thanks for this info Big Short. Once you have co located your servers in the NSE data center, can you change the Auto Systems on the fly in real time, or if they have to remain fixed, without any changes possible ? Because someone said that all these systems which are to be used in co location services, needs to be first submitted to the Exchange for thorough inspection etc. So the question arises, if you want to implement any new trading system in real time, like maybe because of the change in market state etc., then is such a thing possible or not ?

Is there any Specific Fixed Software Configuration that is allowed on those co located servers, or if one can install the software of their choice ? For the Operating System, as well as for the Real Trading Software as well. Although most institutional clients would be using their own custom developed software for such work, but if someone wants to use Trading Platforms that are available in the market, then is that allowed or not ?

How do you guys manage the privacy or secrecy aspect of your trading systems ? Everyone knows how things works in India ! If the exchange guys have complete access to all your systems, then you know what could happen !!

Apart from Lowest Latency in receiving the data and in order placement, what other major advantage is there, which makes Big Traders and Institutes to pay huge fee to the exchanges ? Can you please point out some advantages ?

Can you provide any rough idea about the most basic co location package that is available from the NSE, like how much it costs and what it includes ? The most basic starting level of package.

Can retail traders apply for the same, or if it only for the Big Institutes and Trading Members only ?

Sorry for bugging you with so many questions, but we do not have many guys here in traderji who could have such information. Once again thank you so much for all your help and guidance.

Thanks and regards
 
#24
Thanks for this info Big Short. Once you have co located your servers in the NSE data center, can you change the Auto Systems on the fly in real time, or if they have to remain fixed, without any changes possible ? Because someone said that all these systems which are to be used in co location services, needs to be first submitted to the Exchange for thorough inspection etc. So the question arises, if you want to implement any new trading system in real time, like maybe because of the change in market state etc., then is such a thing possible or not ?

Is there any Specific Fixed Software Configuration that is allowed on those co located servers, or if one can install the software of their choice ? For the Operating System, as well as for the Real Trading Software as well. Although most institutional clients would be using their own custom developed software for such work, but if someone wants to use Trading Platforms that are available in the market, then is that allowed or not ?

How do you guys manage the privacy or secrecy aspect of your trading systems ? Everyone knows how things works in India ! If the exchange guys have complete access to all your systems, then you know what could happen !!

Apart from Lowest Latency in receiving the data and in order placement, what other major advantage is there, which makes Big Traders and Institutes to pay huge fee to the exchanges ? Can you please point out some advantages ?

Can you provide any rough idea about the most basic co location package that is available from the NSE, like how much it costs and what it includes ? The most basic starting level of package.

Can retail traders apply for the same, or if it only for the Big Institutes and Trading Members only ?

Sorry for bugging you with so many questions, but we do not have many guys here in traderji who could have such information. Once again thank you so much for all your help and guidance.

Thanks and regards
Sorry for the late reply, but let me tackle some of your questions.

1. Yes, you can change your systems anytime you want. You can add new strategies or remove old ones. Exchange approval is not needed for your trading strategies , it is only needed to get your trading platform and CTCL approved. The exchange is not concerned by your trading logic, but only with your trade flows. So no worries on that front.

2.You can install any software/trading platform on your co located servers.
You can buy from the market or create one.

3. Low Latency in data and order placement is a huge advantage. Speed is one of the major differentiating factors in HFT hence they pay a huge amount for these service. Their entire business model depends on speed and getting execution before the big order gets executed. Speed and low latency is necessary for their survival.

4. Exchange does not have access to our systems, even though they are co located in their data centres. Only we have access to our machines there.

5. Sadly, i do not know how much is the annual cost of getting a rack in the data centre is. But it is significant i am sure. I would suggest against venturing into co location if you are just a retail trader.
 

TradeOptions

Well-Known Member
#25
Sorry for the late reply, but let me tackle some of your questions.

1. Yes, you can change your systems anytime you want. You can add new strategies or remove old ones. Exchange approval is not needed for your trading strategies , it is only needed to get your trading platform and CTCL approved. The exchange is not concerned by your trading logic, but only with your trade flows. So no worries on that front.

2.You can install any software/trading platform on your co located servers.
You can buy from the market or create one.

3. Low Latency in data and order placement is a huge advantage. Speed is one of the major differentiating factors in HFT hence they pay a huge amount for these service. Their entire business model depends on speed and getting execution before the big order gets executed. Speed and low latency is necessary for their survival.

4. Exchange does not have access to our systems, even though they are co located in their data centres. Only we have access to our machines there.

5. Sadly, i do not know how much is the annual cost of getting a rack in the data centre is. But it is significant i am sure. I would suggest against venturing into co location if you are just a retail trader.
Thank you so much for replying to my queries Big Short.

Best regards
 
#26
Nest Plus API and NEST-XL queries

:) My broker has provided me Nest Trader and I have registered for Nest Plus Services Free Trial for one year. Now my broker is reluctant in helping me out and no-reply of emails from Omnesys either, for below queries.

According to this webpage, http://algoji.com/excel-automated-trading/, Nest Plus API costs about Rs. 300/pm but then from where to subscribe for that (through broker or directly from Omnesys), and what are the usages? Is it possible to fully-automate trading in MS Excel using that API? :confused:

Another product of Omnesys is, http://www.omnesysindia.com/nestxl.html, NEST-XL. Does anyone has an idea about this, as how it works, features and costs? Since there was no response from Omnesys? :p

Pros and Cons of using MS Excel as trading platform/backtester for simple strategy execution VS commonly known trading platform/backtester available in the market!! :(
 
#27
Sorry for the late reply, but let me tackle some of your questions.

1. Yes, you can change your systems anytime you want. You can add new strategies or remove old ones. Exchange approval is not needed for your trading strategies , it is only needed to get your trading platform and CTCL approved. The exchange is not concerned by your trading logic, but only with your trade flows. So no worries on that front.

2.You can install any software/trading platform on your co located servers.
You can buy from the market or create one.

3. Low Latency in data and order placement is a huge advantage. Speed is one of the major differentiating factors in HFT hence they pay a huge amount for these service. Their entire business model depends on speed and getting execution before the big order gets executed. Speed and low latency is necessary for their survival.

4. Exchange does not have access to our systems, even though they are co located in their data centres. Only we have access to our machines there.

5. Sadly, i do not know how much is the annual cost of getting a rack in the data centre is. But it is significant i am sure. I would suggest against venturing into co location if you are just a retail trader.
Hi Big Short

Which VPS service providers would you recommend to retail investors holding account value of upto 40k for low-frequency-transaction trading!

To extend the benefit of speed and low latency, combining with simple and complex strategy executions, what software-setups you recommend to host on those VPS!

Your views on using MS Excel as trading platform on VPS for simple strategy executions!

Best Regards
 
Last edited:

augubhai

Well-Known Member
#28
Frankly if you are trading the indices , e.g. Nifty or Banknifty, the slippage is not an issue. My analysis on at least 6 months of data on our systems suggest that we are paying a slippage of roughly 1000 rupees per crore if we trade market orders.

Hi Big Short,

How many lots of Nifty/Banknifty do you trade per order?

For that position size, what is the average slippage in points?
 

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