Revisiting Algorithmic Trading


The screen capture above is of PERSISTENT across the 23rd and 24th of December. When trading in a volatile environment, the rapid change in prices are a challenge. In the first trading session of 23/12 market price moved from 4,537 to 4,647 (closing). The next day, they crossed 4,770 within seconds. Prices were much calmer through the rest of the day as the market settled into a more bearish stance. If opportunities were to be found it was for that brief period. In such situations having a machine at your side is invaluable.

India is in the midst of a huge bull-run in IT stocks. Not new, it’s been the case since mid-2019 and perhaps early 2020. Even though we hit a speed bump in March ’20, it only served to hasten the rise and maturity of technology stocks and investing. IPOs of Happiest Minds, Latent View, MapmyIndia, Nykaa, Paytm and were the culmination of this bull-run and it isn’t over yet. There’s more in the pipeline. If IPOs are one aspect, new opportunities are created everyday and the screen grab is just one instance. It begs to be repeated, these opportunities are created every single day.

I recall listening to an investment relationship manager in the early days of the 2009 depression. As she faced a crowd of irate investors who were watching their capital invested sink daily, she was at a loss for words. A few weeks ago, the market had been consistently delivering record returns. All the profits had vanished with the large institutions that had dumped their holdings. “You should learn to book your profits in time” she hollered pointlessly. It’s hard to follow this advice in a bull run.

Market values can fall just as rapidly as it goes up. Since it’s peak in October, the NIFTY has touched lows of mid-16,000 fluctuating rapidly after being rejected by mid-17,000 levels. All this havoc is reflected in market prices of the major scrips RELIANCE, HUL, INFOSYS, none of them escaped unscathed. Like most people, I was convinced that the good times would continue. So hard-earned savings sat and stagnated. What was missing was the clarity and resolve to follow reality, to change when the outlook changes. Algorithms enable both qualities in abundance.

Amongst other things, I’m playing with Algo-trading platforms to understand how to navigate such volatility with ease and peace of mind, to find and exploit opportunities every day. There’s a good amount of technology out there that makes it possible for an individual to work with machines without having to write code (or otherwise). Machines allow you to sit back, remove emotion from our financial decisions and to participate in opportunities that were otherwise closed to the individual investor.

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