Over the past two decades, algorithmic trading has been widely applied in worldwide stocks and futures markets. In the US, over 85% of equities and futures trading are done through computerized methods. However, it is unbelievable that China’s exchanges only has 5% of trading volume attributed to computer programs. Nevertheless, China’s algorithmic trading has grown dramatically in popularity during past 5 years. Although amateur algorithm developers have grown rapidly in China, the odds of success are low for most of these quants.
Relative to those in China, professional algorithm developers in US are much more sophisticated. This is the reason we established AlphaNu and positioned it as the premier marketplace for computer trading algorithms developed by Wall Street professional quants. AlphaNu’s goal is to provide China and the rest of Asia with top-tier computer trading strategies from Wall Street’s best professional algorithm developers.
Algorithm Trading Strategies
Algorithmic trading strategies contain various trading styles. These strategies can be mainly classified into several types:
1. Momentum-based trading strategies
Some algorithmic trading strategies are developed based on technical analysis, which analyzes historical price pattern and trading volumes to generate trading signals. The most widely-used trading style is momentum-based, also known as trend following. Momentum-based algorithms are popular because the theory is intuitive and the programs are relatively easy to design.
2. Arbitrage trading strategies
Arbitrage is theoretically defined as a strategy which can ensure positive trading profits without suffering any risk of loss. For practical application, this strategy can be achieved through purchasing an asset and simultaneously sell another asset which has highly-related payoff and is relatively cheap. For example, cross-listed stocks are the commonly-used paired assets while a security and its corresponding derivatives is another one.
3. Derivatives-Based Strategies
Some academic literature argues that derivatives such as futures and options are frequently used as a trading tools for informed traders to exploits their private information since these derivatives are usually liquid and with high leverage. This implies that derivatives could even respond to market information previous to their underlying assets. Thus, traders sometimes can search for trading signals from the quotes of futures and options markets. For example, some traders use the difference of the implied volatilities between different strike prices as an indicator of prosperity or recession.
Due to the rapid development of computer trading, there are various types of algorithmic trading strategies and algorithms itself are getting more and more complicated. AlphaNu is a platform and marketplace which aims to facilitate subscriptions to powerful and profitable trading algorithms created by the top Wall Street developers. Our platform directly enables end user trading accounts on brokerages to use the algorithms created by the top developers in the world.