Today Wall Street, The financial Citi center in London, and Hong Kong Financial centers are somehow operated by humans with the support of thousands of financial algorithms. These technology mathematical robots, crawlers of big data, sentiment and other information are creating a new Finance and Technology landscape that very few people are aware. These algorithms are now responsible for most of the overal worlwide trading and have created a new market technological financial ecosystem, sometimes bull and bear and volatile, unpredictable, and impossible for humans alone to comprehend.
The entire financial system is now run by sophisticated technologies. Over the last 30 years and special in the past decade, FinTech systems have been developed to augment the capacity of the financial industry and in particular algorithmic trading has somehow overtaken the way the capital markets, and special the trading industry operates. At the moment both the single desk of a financial startup hedge fund to the gilded halls of the big players such as Morgan Stanley, Goldman Sachs, Citi, Barclays, or most of the major Forex traders players are using computer code and big data crawlers that are now responsible for most of the activity on the financial global markets.
In some studies, some estimates, states that computer-aided high-frequency trading now accounts for about 75 percent of total trade volume. Increasingly, the capital market’s ups and downs are determined not just by macro data and economic stats, but also by traders competing to see who has the best mili second information or sharpest business mind with the support of massive numbers of financial algorithms scanning big amounts of big data and sentiment in order to deliver the best profit margins.
The major players in the trading and special in the forex trade – namely the inter-bank traders – have been using algorithmic (also known as quant) trading techniques for a few years now. These are automated trading mechanisms that are mainly designed to take lots of quick profits from very short-term trades, with the positions often being open for just a few seconds or less.
This hasn’t put independent traders at that much of a disadvantage, as most tend to observe longer-term swing trading strategies, and the vast increase in trading activity has had some benefits in terms of increased liquidity and price stability. However, it has made it much more difficult to make profits from short-term manual trades, which has left many independent traders looking for ways to incorporate algorithmic trading into their own strategies. For the lowdown on algorithmic trading, check out the infographic at the bottom of this article.
To a certain extent, the popular MetaTrader 4 platform, together with its vast library of open-source trading algorithms and scripts, has provided this facility. However, in order to back-test strategies, traders had to pay a high price to access detailed market data, and often lacked the computing power to process this in a timely fashion.
Algorithmic Trading – Explained
Bellow an excellent infographic by QuantConnect team that displays and defines the context of Algorithmic Trading and uses some key examples and research. Some numbers to think only 25% of the global trading is effected by humans as we speak.
Article written with the contribution of Paul Milnes.
Dinis Guarda is an author, speaker, serial entrepreneur, advisor and experienced CEO.
He creates and helps build ventures focused on global growth, 360 digital strategies, sustainable innovation, Blockchain, Fintech, AI and new emerging business models such as ICOs / tokenomics.
Dinis is the founder/CEO of ztudium that manages blocksdna / lifesdna. These products and platforms offer multiple AI P2P, fintech, blockchain, search engine and PaaS solutions in consumer wellness healthcare and life style with a global team of experts and universities.
He is the founder of coinsdna a new swiss regulated, Swiss based, institutional grade token and cryptocurrencies blockchain exchange. He is founder of DragonBloc a blockchain, AI, Fintech fund and co-founder of Freedomee project.
Dinis has created various companies namely Ztudium, a tech, digital and AI blockchain startup that builds cutting edge software, big data insights, publishes intelligenthq.com, hedgethink.com, tokensdna.com and tradersdna.com among others.
Dinis is the author of various books. His upcoming books “How Businesses and Governments can Prosper with Fintech, Blockchain and AI?”, also the bigger case study and book (400 pages) “Blockchain, AI and Crypto Economics – The Next Tsunami?” last the “Tokenomics and ICOs – How to be good at the new digital world of finance / Crypto” will be launched in 2018.
Some of the companies Dinis created or has been involved have reached over 1 USD billions in valuation. Dinis has advised and was responsible for some top financial organisations, 100 cryptocurrencies worldwide and Fortune 500 companies.
Dinis is involved as a strategist, board member and advisor with the payments, lifestyle, blockchain reward community app Glance technologies, for whom he built the blockchain messaging / payment / loyalty software Blockimpact, the seminal Hyperloop Transportations project, Kora, and blockchain cybersecurity Privus.
He is listed in various global fintech, blockchain, AI, social media industry top lists as an influencer in position top 10/20 within 100 rankings: such as Top People In Blockchain | Cointelegraph https://top.cointelegraph.com/ and https://cryptoweekly.co/100/ .
He has been a lecturer at Copenhagen Business School, Groupe INSEEC/Monaco University and other leading world universities.
He is a shareholder of the fintech social money transfer app Moneymailme and math edutech gamification children’s app Gozoa.
Between 2014 and 2015 he was involved in creating a fabbanking.com a digital bank between Asia and Africa as Chief Commercial Officer and Marketing Officer responsible for all legal, tech and business development. Between 2009 and 2010 he was the founder of one of the world first fintech, social trading platforms tradingfloor.com for Saxo Bank. In 2011 he created the B2B platforms socialmediacouncil.org and openbusinesscouncil.org with Jamie Burke.