How You Can Learn to Be an Algo Trader

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You probably hear two things often: trading and algorithms. They aren’t always mutually exclusive, but you likely hear people talking about trading in relation to making money from stocks and algorithms being mentioned because of social media and internet search feeds.

They aren’t always mutually exclusive and algorithmic trading is something you might be looking into. Algo trading is interesting because it is not the most common way to trade instruments or commodities so it takes some knowledge before getting into it. Here is some helpful information that can be useful for you to learn this trading technique.

Understanding How it Works

First things first, you need to understand how this trading works and why it is different from other trading techniques. The interesting thing about algorithmic trading is that it is not automated trading, contrary to many people’s belief that it is. It is a type of trading that is, in the most basic sense of the meaning, done through programming to create code based on algorithms of various patterns. 

Some of the differences between this type of trading others, like automated trading and quantitative trading include the fact that algo trading is used to create the algorithms that can be used in quantitative trading models, and automated is mostly hands-off from the trader.

What You Need to Know to Get Started

Just like any kind of trading, you can’t just jump in blind and expect to start making profits. This is not a viable strategy nor is it going to be profitable in the slightest. Algo trading used to be incredibly difficult to get into because it was presided over by Ph.D qualified traders with backgrounds in the sciences of econometrics, quantitative maths, and economic trading knowledge.  It is not like that anymore, but you still need to know programming skills, quantitative methods, and financial knowledge to succeed, so those are universal skills to get comfortable with and fast.

Developing Your Trading Skills

Understanding your level of ability for trading skills is a must here. You need to know more about quantitative methods over fundamental and technical analysis as the game, so to speak, is switching to a new field. 

You still need a good understanding of instruments like stocks, options, currencies, and futures as these are still the end goal of algo trading at the end of the day. Improving your trading skills is always a must, but you need to be better at statistics and problem-solving considering the nature of algo trading is based on quantitative models.

Resources for Learning

Including some of this information, you are going to be able to find a significant amount of resources online. There are plenty of online resources to help you learn what algo trading is and how it works, and where to get started. Online courses are a good one if you can spare the time (up to 6 months of lessons) as well as whatever it may cost depending on each package. The most important thing you will want to find in terms of education resources, videos, articles, or whatever it is, is on coding.

Learning Coding Language

As an algo trader, this is going to be one half of the bread and butter that lets you achieve success. Aside from all of the trading knowledge you need to have, you need to know how to code to build the algorithms and know how they work as well. The coding languages of C++, Java, or Python are good ones to start with so you can find a compiler to download and begin learning. Coding takes some months to learn and get good at so you need to really dedicate time to get to a point where you can understand statistics and quantitative models to start programming an algorithm of your own creation.

Where You Can Go With It

You also might be wondering what you can do with algo trading and the answer is as broad as your ambitions. Most people will aim to get hired by a firm to work for them on various desks, but you can also use this as practice to learn how to trade in different models for your own personal reasons. You probably won’t have access to the same equipment or quants as a trading firm, but it is good to expand your base of knowledge for trading regardless. 

Becoming a good trader takes a long time, but it starts with small steps. If you’ve ever been interested in algo trading, this information can help you figure out those first steps to getting into this unique field.


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