3 Efficient Intraday Trading Strategies Used in Algorithmic Trading

by Alpha Bot An automated trading system

Intraday trading, as the name suggests, refers to the process of buying and selling financial instruments on the same trading days – which, in effect, means that all the positions are closed before the market shuts down for the day. By making use of the intraday trading strategies, the investors or speculators, as they are called, are able to generate great profits. Algo trading strategies, on the other hand, make the process incredibly fast and much more result-oriented. Using algo trading strategies in tandem with intraday trading strategies, you can generate great profits with minimal risk.

Given below are some of the most popularly used, foolproof intraday trading strategies that are used to optimize the algo trading process.

Momentum and Trend Based Strategy:

This is, perhaps, one of the simplest and most straightforward ways of conducting trades in the market. You are not required to make any complex predictions. All you have to do is to follow the market trends and your algorithm will execute the trades accordingly. The decision to conduct trades will be made according to a number of technical indicators - the moving averages, the price level movements, channel breakouts, etc. Once a given set of conditions is satisfied automated trading happens.

Arbitrage Strategy:

Arbitrage strategy can come in handy if there is a difference in the costs of the securities between two different stock exchanges. The algorithm you are using will collect the information from different exchanges and quickly identify the two stock exchanges with the greatest difference between the prices of their securities. It’ll then buy the securities from the cheaper exchange and sell it to the costlier one to generate maximum profit. This is known as arbitrage profit. Although the profit gained per trade isn’t too high, but when you consider the speed at which automated trading works, you can make a substantial number of trades to generate quite a lot of profit.

Weighted Average Price Strategy:

This is one of the most popular as well as one of the most effective trading strategies. In this strategy, you are supposed to quick-execute the order to the volume-weighted average price or the time-weighted average price. It is to be noted that the orders are executed in small parts. The order is based at either volume-weighted average price or the time-weighted average price in specific opening price in defined time slots.

The benefit of using algorithms is that they are able to release the different orders in small portions, efficiently and accurately within a matter of nanoseconds. Needless to say, it is an impossible feat for human traders.