Best Practices for Risk Management in Automated Trading – Part 2

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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.

Internal Control Policies

The internal control policies of any firm must have the ability to detect and prevent the disruptive activities in trading potentially. The disruptive activities must be detected and prevented based on some factors like trading trends, positions, strategies and the behavior of the trade. Also the market participants and the trading venues are advised to include non exhaustive list of indicators in their compliance plan. Some of the indicators that are required to be added by the firms and trading venues are listed below

• The unusual quoting activities must be submitted to the market through electronic trading platforms.
• Unusual volume of quotes
• Unusual number of modifications and cancelations
• Unusual number of quotes submitted without the resulting transactions
• Potential accumulation of positions
• Breaches of, frequent changes and risk limits
• Changes in the trading systems
• Algorithms released in new trends

Apart from these generalized indicators, the firms and trading venues can also add certain strategy specific, firm specific and venue specific indicators if required.

Managing Sizeable Positions

The long and short trading activities are really not a big problem in the case of trading. But it is also important to manage the terms of trading in order to avoid the disruptions in the market. The market participant should manage the large positions with the heightened vigilance, mindful of the need to support the liquidity in the market. The long short or the long positions in the floating supply in an issue must be given a close look in order to avoid the uncertainties. Also the market participants who were in to material sharing on daily trade should have to make changes in their strategies carefully.  Know more about learn algorithmic trading in Singapore

Promoting efficient market clearing is another best practice for managing the risk in the market. The market participants should have to review their market clearing and the settlement practices at the speed of light as the market execution also occurs in the same speed. Many algorithmic trading institutes all over the world are providing some best certification courses in finance in Singapore to make the young aspirants enter in to the market and trading. Choosing the right algorithmic trading institute will let the candidate have a better exposure to the world market. please follow us at


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