Algorithmic Trading with Shashi
Algo trading uses pre-defined rules to enter and exit trades automatically. Understand how it works, how it is tested, and its limitations.
What algo trading is
Algorithmic (algo) trading uses a computer program that follows a defined set of rules to place trades automatically. The rules are written in advance — covering when to enter, when to exit, how much to risk, and how to manage open positions. Once running, the algorithm executes without human judgement on individual trades.
This differs from copy trading, where a human trader makes each decision. Algo trading is systematic and consistent, but it cannot adapt to unprecedented market conditions the way a human can.
Defined rules
Entry, exit and risk rules are fixed in code. The algorithm follows them exactly, every time, without hesitation or emotion.
Testing
Strategies are tested on historical data (backtesting) and on live prices with simulated money (forward testing) before being run with real capital.
Monitoring
Algorithms require monitoring. They can malfunction, lose connectivity, or behave unexpectedly in market conditions not present in their test data.
Limitations to understand
- •A backtest is a simulation. It does not guarantee future performance, because real trading involves slippage, spreads and emotional pressure that a simulation may not capture.
- •Algorithms cannot anticipate events outside their rules. A strategy tested only in calm markets may fail in a sudden crisis.
- •Technical failures — connectivity loss, broker outages, or code errors — can cause missed or unintended trades.
- •Over-optimisation is a real risk: an algorithm tuned to fit historical data perfectly often performs poorly in live trading.
Availability
Algo trading capabilities depend on the platform and broker you use. If you are interested in an algo approach rather than copying a human trader, please contact us to discuss what is currently available and suitable for your situation.
