Algorithmic Trading Broadens Appeal
Although algorithmic trading has become ubiquitous among institutions, it’s been relatively inaccessible to everyday investors. That has spurred platform providers to allow retail traders users to intelligent automated trading decisions.
“A lot of people don’t know that these tools are available or that they exist at all, so we need to educate them about just our presence in general,” said Justin Bouchard, CEO of AlgoFast, a platform which aims to replace traditional ‘buy and hold’ strategies by giving investors the ability to automate event trading strategies. “We wanted to bridge the gap between the professional trader and the individual investor.”
There exists a stark difference between the tools and technologies available to the two market demographics. “The transition for traders going from the floors to the screen happened around 2000 to 2005,” Bouchard said. “I saw this revolution in trading that was only happening for professionals. I know the revolution will happen for individuals because obviously the early adopters are going to be the traders that are doing it for their day jobs. They just need to do these things to survive.”
The big difference is information. “If you look at a professional trader today, they’re surrounded by computer screens,” Bouchard said. “They’re looking at a quote book, they’re watching Bloomberg or CNBC or Fox Business News. They probably also have a squawk box that’s yelling out rumors. The professional knows that information is so vitally important to what they do, but individuals have been taught that you’re not going to beat the market and they’re ignoring all these different things.”
Bouchard is a longtime advocate for the democratization and demystification of trading. “Most people that own stock are not paying attention to earnings reports,” he said. “They’re not paying attention to management changes or the economic environment. We want to bring all this information to individuals so that they can start making better decisions with that information and pay attention to their portfolios.”
Often these events are fairly easy to interpret in terms of stock prices, but in order to take advantage of the overwhelming amounts of information, investors need a system in place at all times.
Bouchard’s background is computerized trading. “My first boss told me I wasn’t allowed to go out onto the floor, because he had the foresight to see that everything was moving to the screen,” he said. “I’m really thankful for that because from what I saw, anyone who tried to make that transition from the floor to the screen really struggled with it, whereas my start was on the screen so it’s always been natural for me.”
Later, when Bouchard started his own trading firm, Bouchard Trading, he employed this philosophy, hiring computer science professionals over seasoned traders. “We were hiring programmers and teaching them how to trade,” Bouchard said. “I figured out that you can teach a programmer how to trade, but most of the time you can’t teach a trader how to program.
Algorithmic trading was a natural extension of this approach. “I kept finding myself saying to the programmers, ‘If this happens do this trade,’” Bouchard said. “Eventually we realized that we should just put that concept into the software as an “if-then” statement. With software, we can take algorithmic trading and allow individuals to create their own algorithms without having the programming skills. If there’s an earnings report that’s stronger than X, I will execute trade Y. That’s where AlgoFast came from.”
The use of algorithmic trading across FICC markets has increased significantly.
China A Shares now constitute 6% of the FTSE Emerging Index.
"Robots will learn an awful lot" from March's extreme volatility.
'Shortwave as a Service' provider says its speed is the new benchmark for latency between exchanges.
There needs to be more emphasis on execution cost analysis and using real-time data.