An Introduction to Algorithmic Trading By XFR Financial Ltd

First let us define what an algorithm is. It is a specific set of instructions which are aimed to carry out a definite task or a process. Algorithmic trading is the process of using the computer programs to execute a certain set of instructions related to perform trading in order to generate profits at a particular set time and frequency. These defined set of rules are based on price, timing, quantity or any type of mathematical model. XFR Financial Ltd provides profit opportunities to the trader and also help in making the market more liquid. The reason behind the increase in the liquidity of the Forex market is that the emotional aspect of trading is eliminated in this case.

The example of algorithm used by a trader is:

Buy a particular currency in a particular quantity if the 50-day moving average goes above the 200-day moving average.

Using this algorithm when trading at XFR Financial Ltd with the combination of others it is easy to create a computer program which will automatically monitor the currency movement and place the buy or sell order when the conditions defined are met. The biggest advantage is that the trader is not needed to keep a watch on the market and on the graphs and indicators or putting the order manually. The algorithmic trading does the entire thing for him and identifies the market opportunities correctly at the right time. The trader thus misses no opportunity of trading the currency in the right direction.

Benefits of Algorithmic Trading at XFR Financial Ltd

  • Algo- trading provides a number of advantages to the Forex trader and here are some of those main benefits-
  • Trader is able to execute the trade at the best prices
  • High chances of execution of the trade orders at the desired levels
  • Trades are timed are accurately and the significant price changes are avoided
  • The transaction costs of trades are reduced to a significant level
  • Multiple market conditions are also considered
  • The risks of manual errors are automatically reduced in the case of algo-trading
  • The human errors on trading based on emotional and psychological factors are reduced with algo-trading
  • It provides a more systematic approach to active trading than the methods which are based on human instinct.

Technical Requirements

The last part of the Algorithmic trading is the implementation of the algorithm using a computer program but the challenge lies actually in transforming the strategy into an integrated computerized process that has an access to the trading account to place orders with XFR Financial Ltd. The following things are required for algorithmic trading.

  • Computer programming knowledge to program the needed trading strategy and hired programmers or pre-made trade software
  • Network connectivity
  • Access to the different trading platforms to place the orders
  • The ability to backtest the infrastructure once built before it goes live to the market.
  • Availability of the historical data for backtest the system which depends on the complexity of the rules used in the algorithm.