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The account-opening process also enables you to designate electronic pathways between your bank account and brokerage account so that money can move in either direction. These electronic conveniences require computer equipment, such as servers, and human oversight to make sure everything is set up properly and works as planned. To complicate matters further, the electronic interface must include all exchanges (Nasdaq, NYSE, etc.) from which an investor may choose to purchase a security.
Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader. The greatest portion of present day algo-trading is high frequency trading (HFT), which attempts to capitalize on placing a large number of orders at very fast speeds across multiple markets and multiple decision parameters, based on pre-programmed instructions.
Systematic traders (trend followers, pairs traders, hedge funds, etc.) find it much more efficient to program their trading rules and let the program trade automatically. Algorithmic trading provides a more systematic approach to active trading than methods based on a human trader's intuition or instinct.
Any strategy for algorithmic trading requires an identified opportunity which is profitable in terms of improved earnings or cost reduction. The most common algorithmic trading strategies follow trends in moving averages, channel breakouts, price level movements and related technical indicators. A lot of proven mathematical models, like the delta-neutral trading strategy, which allow trading on combination of options and its underlying security, where trades are placed to offset positive and negative deltas so that the portfolio delta is maintained at zero. The implementation shortfall strategy aims at minimizing the execution cost of an order by trading off the real-time market, thereby saving on the cost of the order and benefiting from the opportunity cost of delayed execution.

Because forex (FX) is a decentralized market in which dealers disseminate their own price feeds through proprietary trading platforms, it is crucial to learn the features and idiosyncrasies of each type of trading software before committing real funds to an account.
Placing Orders As a trader, you should always try out dealer demos before trading live - it's the only way to become familiar with the different features of various platforms.
It's a good idea to place at least 20 demo trades on each platform before trading actual money, just so you can master the specifics of order entry on each platform.
Trade Like It's Real Once you have mastered the mechanics, you can use the demo platform to experiment with various trade sizes and styles and determine your trading personality. Most brokerage websites offer access to research reports that will help you make your decision, and real-time quotes that tell how much the security is trading for at any given time.
The data must be sent back out to the systems that collect and display pricing to other market participants to facilitate trading in the broader marketplace. These are the easiest and simplest strategies to implement through algorithmic trading because these strategies do not involve making any predictions or price forecasts. The challenge is to transform the identified strategy into an integrated computerized process that has access to a trading account for placing orders.
This tutorial will delve into the workings of the electronic systems that allow this direct access. Apart from profit opportunities for the trader, algo-trading makes markets more liquid and makes trading more systematic by ruling out emotional human impacts on trading activities. The algorithmic trading system automatically does it for him, by correctly identifying the trading opportunity.

Reporting, though hardly the glamorous part of FX trading, is a crucial part of a trader's personal record keeping and can have significant tax ramifications.
To make demo trading as productive as possible, you need to trade the demo account as though the money were real. Although demo trading will not guarantee you profits in real life, almost all traders agree that if you cannot first achieve success on a demo, you are almost certain to fail in your live account. The flash crash was a brief trading glitch that caused the Dow Jones Industrial Average to plunge 998.5 points in just 20 minutes. Dealers simply produce detailed transaction histories - in an electronic format - from which the traders must then compile their own tax reports. Whether you are an aspiring trader or a seasoned investor looking to find out how it all works, this tutorial explains all the nitty-gritty electronic trading systems in layman's terms.
For example, if you have no experience trading stocks but wish to open an account that lets you trade using borrowed money (margin account), your application may be denied. Here we'll discuss the importance of demo trading and let you know what you should look out for when trying different platforms. Such an arrangement clearly calls for a trading platform with highly organized and flexible reporting functions.

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Author: admin | 12.04.2014 | Category: Stock Online Trading

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