How to get into Algorithmic Trading? | Explained

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- This short video briefly explains how one can enter Algorithmic Trading, the skills one needs to possess, the knowledge required, etc. But, how can one get into Algorithmic Trading? To put it simply, this domain that you are talking about is interdisciplinary in nature. It’s a combination of math and stats, programming and domain knowledge of financial markets.

You will find that this is not very different from what we often hear about data science. In some sense, we are operating in the world of data science but specifically pivoted towards financial markets So, the math and stats help you with regards to dealing with all these large data sets and how you can extract every ounce of insight that you can from them.

Programming helps you express yourself with regard to extracting all that you need from the data that you have. And you need the domain knowledge of financial markets so that you understand the kind of instruments that you are dealing with, whether it is commodities, currencies, options, equities and so on. You bring them all together to get into the domain of quant trading.

Within the domain itself, there will be one or more areas which you are not very comfortable with and as you spend more and more time, the areas that you are not so comfortable with that you need to start learning and teaching yourself so that you have a balanced grip on the domain.

To be a little more specific, when I say math and stats, it’s largely probability theory and when we talk about statistics, it’s the whole arsenal of inferential statistics where you lose this concept of hypothesis testing where you spell out your own beliefs and you rigorously try and test them using hypothesis testing.

As you get more and more comfortable, you would want to add bits and pieces such as some bits of calculus, linear algebra and econometrics. The reason you want to add on these skills is just so that it opens you out to more and more different types of strategies which can start getting a little more sophisticated.

For programming, Python is an excellent starting point. Especially in the world of finance, you’ll find that there are tons of packages and libraries out there which largely simplifies our work because they handle problems that are very unique for finance.

When you talk about financial markets you need to have knowledge of different asset classes like equities, currencies, derivatives and so on. With more experience, you would want to know more about market microstructure, order book management etc. This is what the domain offers.

To put it simply, there are no shortcuts. If you want to train yourself and be ready to trade either on the side as a source of side income or as a full-time trader either for yourself or for an institution, it’s important that you remember that what you are doing is that you're training yourself for the next few decades.

It’s not one of those short sprints which will get you ready. As you keep this in mind, you will learn to enjoy the process, and the incremental gains that you keep making, the outcomes will take care of themselves.
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Suggested Reads:

Making A Career In Algorithmic Trading
bit.ly/3RPNhUs

Algo Trading Career Opportunities You Can Pursue With EPAT
bit.ly/4hPj9Dk

How Much Salary Does a Quant Earn?
bit.ly/4hfd82H

Career Development - Jobs In Algorithmic/HFT Trading
bit.ly/3Sgud1U

How EPAT Can Help You!
bit.ly/4yTc5eZ

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This is a clip from our webinar 'Algorithmic Trading - Why make the move?'.
Complete webinar video recording: youtu.be/73gr7qkQedo
Slides: bit.ly/3Rvm9Kz
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Most useful links:
Join EPAT – Executive Programme in Algorithmic Trading: bit.ly/4fSI8mC
Visit us at bit.ly/4z5H47V
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