Understanding Algo-Trading and Its Future

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Algo-trading is an automated facility where trading is done with the help of a computer program that the traders design. So, instead of the traders manually handling all the buying and selling as well as the constant monitoring, they just put all these tasks in the hands of a smart computer and an algo software. The future of algo-trading in India is obvious because millennials are tech-savvy individuals who understand and have hands-on experience with smart software and artificial intelligence-like (AI-like) technology.

An automated trade or algo-trade is a high-speed trading technique that takes around 18 microseconds to execute a trade. And all this execution is only possible through a computer. Manually, it takes more time and effort for large quantities of trade. In terms of funds, if a human manager can handle a portfolio worth about ₹1 to ₹5 crore, whereas an algo system can handle a portfolio worth ₹50 to ₹60 crore.

In India, algo-trading was introduced around 2005, but it was legally approved by the Securities and Exchange Board of India (SEBI) in 2008. Technology and trading are intertwined in the same way that an engine and a buggy are. As technology advances, traders who want to participate in the technology can learn and adapt to trade using the algo-trading method. In India today, 60 to 70% of the market is automated. But in the coming year, algo-trading is going to expand, and the reason for the future of algo-trading is the increasing awareness and improvement in technology.

Where to Start Learning?

It’s not easy to make an algo-trading career. An algo-trader requires skills and knowledge about the financial market. The person needs to have knowledge of coding and the skills to identify trending stocks. An analyst’s background is a better add-on in this field. There are various programs in India that can help you learn online about algo-trading. With equipment like computers and specialised software, you can trade from anywhere.

For reference, the Indian Institute for Quantitative Finance (IIQF) offers a six-month and a one-year certificate along with diploma courses in algo-trading. The course for an algo-trading programme can range from ₹60,000 to ₹1 lakh. Depending on the institute, you can opt for the algo-trading course at your convenience.

But it’s important to know that algo-trading is risky. There are lots of responsibilities involved in it. According to SEBI and Reserve Bank of India (RBI) research, algorithmic trading without proper regulation can cause a massive disruption in the stock market.

Different Roles in Algorithmic Trading

A Retail Algo Trader

In India, there are millions of retail investors. But not everyone knows about algorithm trading. But with the addition of the application programming interface-based (API-based) trading system offered by discount brokers, now the retail investor understands how to operate algo-trading and has the knowledge of different strategies to trade in the stock market. You can test this strategy in a virtual environment and then trade in the real world.

Propriety Algo Trading Firm

Large-scale algo-trading is carried out by proprietary trading firms, where high-frequency trading (HFT) is done on a huge system. There is a whole team to operate, condition, and maintain this algo-trading system and provide a profit-gaining strategy.

Institutional Algo Trading Firm

All giant brokerage firms have an online trading platform for their traders. The role of this platform is to design a system and arbitrage algorithms for large-scale trading.

Quant Analyst Roles

As a data scientist, you can work with various fund houses, institutional advisors, Portfolio Management Service (PMS), or brokers to work on economic data and gain valuable insights.

Technical Roles

The algo-trading industry also offers roles to software developers and analysts, as they play an important role in the development of algo-trading software.
Algorithmic trading is transformative in multiple ways. It allows you to do everything from developing profit strategies to investing in diverse assets.

Advantages of Algo-Trading

The following are some of the advantages of algo-trading:

  • You can make large trades with algo-trading. As the large transaction distorts the market price. So, opting for algo-trading puts you in a position where the market moves in the direction you trade.
  • Algo-trading is unlike human methods, where emotion and sentiment are attached to the trade. The trading is purely strategic and condition-based.
  • Algo-trading allows you to trade in multiple strategies, whether long-term or short-term. You can use various mathematical models to trade in the stock market.


Algo-trading is one of the hot topics in the financial market. As a trader, you must always be on the lookout for new technologies that you can use to make money and execute cutting-edge strategies. The workings of algo-trading tools depend upon various people, such as managers, quants, and programmers. If you want to use this method of trading, then you can try the Share India platform. It has expert and advanced software for algo-trading in the Indian stock market.

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