Best Practices for Risk Management in Automated Trading – Part 1

Best Practices for Risk Management in Automated Trading.png

It is well known to world that the automated trading has become a giant in the world market now. The trading cannot be imagined in future without automated systems. The impact of automated trading in the market now is very high. Though the technology is being appreciated for the speed and other features, which are not possible by human actions, the risk involved in this has always created a fear among the marketers. Many marketers still don’t believe in automated trading. Thus the risk management has become a must in every automated system. In order to have a risk free trading, the marketers are advised to follow certain practices. This article is to discuss on those practices to avoid risks and enhance the trading.

Promotion of Liquidity and Transparency in the Market

All the market participants are expected to behave in such a way that they all support the liquidity and integrity in the market. The market participants are often advised to avoid the strategies that hinder the market clearance or compromising the market integrity. Some of the trading strategies will be inhibiting the provision of liquidity by others and some will be restricting the floating type of a particular issue, just to generate the price movements in that respective security or its related markets.

These strategies are usually advised not to be used by the marketers and it also includes the strategies that undue the latency and create the price movements or sometimes causing delay in the other participant’s trade. The manipulative practices like marketer enters with a bid or an offer with an intension to cancel it before the execution phase will not be encouraged in the market. In other terms, the spoofing and layering are restricted in the markets.

Maintenance of a Robust Control Environment

Every market participant is expected to have their business environment working in accordance to the rules and regulations and this must be followed in a strict manner. The market participants should also ensure that their business areas (back, middle and front) are following the best market practices that causes no hindrance to other market participants or to the market. The market participants should follow the policies that are designed to eliminate the strategies that results in the false impression about the market depth to others or manipulative. Also the market participants must ensure that their trading strategies are not causing any trouble to the market and other participants.

The trading venues must take steps to let the participants follow the best market practices and the venue should not allow any mal practices by the participants. The participants who are involving in any activities that is causing trouble to the market and other participants must be answerable to the regulatory. To know more on this, a better automated trading program in India would definitely help you. Choose the right automated trading program in a right corporate finance course in Singapore to gain the best knowledge and to have a better exposure to trading. please Like us at


2 thoughts on “Best Practices for Risk Management in Automated Trading – Part 1

  1. Jacob Lewis

    The risk is not linked to the decision process but to your inventory, independently from the signals that triggered the buys and sells: you can monitor the inventory as usual.


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