• Algorithmic Trading Strategies

Aggressive Execution Strategies

Algo Trading execution strategies are usually classified under two broad categories: a) to get order filled as fast as possible (urgency) b) to get the best price possible for an order. Any strategy is a trade-off between these two preferences as per the discretion of the trader.

Aggressive Execution strategies refer to the first category- getting the order filled as fast as possible. These are ideal for momentum based trading where any delay in getting order filled can result in painful opportunity cost. The following four types of aggressive execution strategies are readily available in Indian Exchanges:

Sweep-to-Fill

The algorithm is used to trade upto the order quantity using a rate of execution that is in proportion to the actual volume trading in the market.

The algorithm removes portions of liquidity as and when it is available in the market i.e. it identifies the best price available in the market and the quantity available against that price and sends out the exact portion of the order for immediate execution.

This algo is available with both Symphony and Omnesys

Pegged to Market

The Pegged to Market algorithm is used to peg the limit order price to the best available ask/bid price.

This algorithm continuously modifies an unexecuted order’s limit price to the best available ask/bid price until the order gets filled.

This algo is available with both Symphony and Omnesys

Discretionary Order

Discretionary algorithm is used to increase the price range within which the orders are eligible to execute. While placing the orders a “discretionary percentage” needs to be specified based on which the “discretionary price” is determined.

The algorithm then stands at the best bid/ask price with a pre-defined percentage of the order quantity. Whenever a price comes on the offer side/bid side which is within our discretionary price the algo will fetch the same.

Once all the quantity at bid/ask side gets filled, the next chunk for same size will go and stand as the best bid/best ask soon and so forth until all the quantities has been traded. It is available from Omnesys and Symphony.

Market-if-Touched/ Limit-if-Touched

Also known as Stop-Loss-Market/Stop-Loss-Limit, these are available by all brokers and not considered under algo facility by SEBI.

Market if Touched algorithm places buy/sell order above or below the market. The algorithm holds the orders until the trigger price is touched,only then the algorithm will send out the orders as a market order

Limit if Touched is similar to Market if Touched. It makes sure that the orders are executed at the limit price mentioned or better.

 

• Pegged to Market
• Sweep-to-Fill