2025-09-27
0 Comments
Algorithmic trading, or Algo Trading, is one of the biggest revolutions in financial markets. Once the secret weapon of hedge funds and investment banks, algo trading has now become accessible to individual investors — thanks to modern platforms, APIs, and brokers. In this detailed guide, we’ll break down everything you need to know about algo trading in simple language, with real-world examples from both India and global markets.
Trading wasn’t always about computers and algorithms. Let’s look at the journey:
Open Outcry Era: Traders gathered on exchange floors (like NSE’s iconic ring), shouting and using hand signals to buy and sell shares.
Online Trading: With the internet boom in the 1990s, trading shifted to terminals and later to mobile apps like Zerodha Kite, Upstox, and Angel One.
Algo Trading: Today, computers can analyze thousands of stocks and execute trades in milliseconds, without human intervention.
This evolution shows one clear trend: technology has always made markets faster, more efficient, and more accessible.
At its core, algo trading is simple: you give a computer a set of rules, and it executes trades automatically.
For example:
Rule: “Buy Reliance if it drops 2% in a day. Sell if it rises 3%.”
Execution: The algorithm runs in the background, scanning prices constantly. The moment these conditions are met, it places the order instantly.
Algo trading can be used in stocks, futures & options, currencies, commodities, and even crypto.
Human traders are limited by emotions, time, and reaction speed. Algorithms overcome these problems:
Speed: An algo can analyze 500 stocks in less than a second.
Accuracy: No fat-finger errors (like typing 1000 shares instead of 100).
Discipline: No fear, greed, or hesitation.
Backtesting: Strategies can be tested on past data before going live.
Scalability: One algo can handle multiple strategies and markets at once.
This is why both institutions and retail traders are rapidly adopting algo trading.
Algo trading typically follows these steps:
Example: “Buy Nifty futures when the 50-day moving average crosses above the 200-day average.”
The logic is written in a programming language like Python or through no-code platforms like AlgoKart.
The strategy is tested on historical NSE/BSE market data to check if it would have worked in the past.
The algo is connected to a broker’s API (e.g., Zerodha Kite Connect, Upstox API) and starts placing trades automatically.
The strategy’s performance is tracked in real time. Adjustments are made if required.
Different traders use different strategies. Some popular ones are:
Trend Following: Ride the wave when markets move strongly (e.g., breakout trading).
Mean Reversion: Bet that prices return to average after sharp moves.
Arbitrage: Profit from small price differences between NSE and BSE or cash vs. futures.
Market Making: Continuously quote buy/sell prices to provide liquidity.
Statistical Arbitrage: Use probability and statistics to find trading opportunities.
AI & ML Strategies: Adaptive algorithms that learn and improve automatically.
Imagine Infosys is trading at ₹1,500.
Your algo rule: “If Infosys falls 1% intraday, buy. If it then rises 2%, sell.”
Execution: The algo monitors Infosys all day. The moment it drops 1%, it buys. When it rises 2% after that, it sells.
Without the algo, you might have missed this while in a meeting or asleep. The algo works 24/7 without breaks.
Algo trading is powerful, but it comes with risks:
Technical Risks: Server downtime, internet issues, broker API failures.
Overfitting: A strategy that looks perfect in backtesting but fails in live markets.
Market Risks: Sudden volatility (e.g., Budget Day, RBI announcements).
Regulatory Risks: All traders must comply with SEBI rules in India.
With proper safeguards, backtesting, and monitoring, these risks can be managed effectively.
Algo trading is growing fast in India. Here are some key points:
Brokers Supporting Algo Trading: Zerodha, Upstox, Angel One, Dhan, Alice Blue.
Exchanges: NSE and BSE provide robust APIs for algo execution.
Regulator: SEBI has issued clear guidelines to ensure fairness and transparency.
Adoption: Both institutions and retail traders are using algos, with rapid growth in 2023–2025.
Earlier, only hedge funds could afford such systems. Now, AlgoKart brings institutional-grade tools to retail traders.
The next decade will see:
AI-driven adaptive algorithms.
Integration with social trading networks.
Automated compliance and tax tools.
Global retail access with mobile-first platforms.
Algo trading will no longer be optional — it will be the default way markets operate.
Q1: Do I need coding skills to do algo trading?
Not necessarily. Platforms like AlgoKart allow no-code strategy building.
Q2: Is algo trading legal in India?
Yes. SEBI regulates it with strict rules.
Q3: Can I lose money with algo trading?
Yes. Like all trading, risks exist. That’s why backtesting and risk management are crucial.
Q4: How much money do I need to start?
You can start small, even with ₹5,000–₹10,000, depending on broker margin requirements.
Q5: Which markets can I trade using algos?
Equities, F&O, commodities, currencies — even crypto on some platforms.
Algo trading = rules + computer = faster, smarter trading.
It removes emotions and improves discipline.
Backtesting is the backbone of success.
In India, SEBI, NSE, and BSE support regulated algo trading.
Platforms like AlgoKart make algo trading simple and powerful for everyone.
Algo trading is not about replacing human traders — it’s about empowering them. By letting algorithms handle the repetitive, rule-based part of trading, humans can focus on creativity, research, and strategy.
Whether you’re a beginner investor or an experienced trader, algo trading is the future — and AlgoKart is here to put that future at your fingertips.
👉 Ready to explore? Start your algo trading journey with AlgoKart today!