Easy Algorithmic Trading For Hedge Funds

  • Trading Systems
  • 26.07.2021 10:30 am

Hedge fund managers come in many ways - Some make decisions with their gut and some with mathematical data. Either way, there are many succeeding at that. But you know, there’s a reason the most successful investors who have relied on their gut instinct are stars - it’s damn hard to do.

At face value, it seems better for an investor to rely on sourced data than gut instinct. At least with data, you can try to predict the future using signals from the present, but relying on gut instinct in that case is not easy. In fact, the world’s best-known performing hedge fund, Renaissance Technologies, is known to rely majorly on computerized trading using quantitative models derived from mathematical and statistical analysis of real-world situations - just a very successful example.

Algo Trading (What, Why, and For)

To start, Algorithmic trading is a method of executing market orders using automated, pre-programmed instructions. It's the use of computer codes and chart analysis to buy or sell assets according to set parameters such as volatility conditions and price movements at a given time.

The rise of algo trading can be traced to human curiosity, this time the curiosity of hedge fund and asset managers to optimize for profitable trading strategies without the need for constant human attention. With pre-programmed strategies, bots can be trained to buy or sell assets at unique market signals (e.g high volatility of stocks, Dow closing 500 below its 20-day moving average) without having a human wait all-days long for those signals.

Algo trading makes use of complex formulas, combined with mathematical models and then some human oversight to make trading decisions. It's such that algo traders often make use of high-frequency trading tech, capable of making tens of thousands of trades per second, far beyond what a human can handle. The benefits of algo trading can include:

  • Trades executed at the best possible prices

  • Reduced risk of manual errors when making trades

  • Backtesting for viability using available historical and real-time data

  • Reduced transaction costs

Problems of Algo Trading

While these benefits make algo trading attractive, it’s not something that’s easy to implement, given there are many hurdles to cross trying so. Such hurdles include the lack of required computing resources, lack of programming and technical expertise, lack of access to testing data e.t.c. These hurdles make firms shy away from algo trading, but it’s not all that bleak; there are workarounds and solutions to these hurdles.

One such workaround and solution to setting up algo trading operations is tapping into the resources, talent and technical expertise of others rather than building yours from scratch. For example, you can access computing resources on the cloud on an on-demand basis instead of buying your own servers; you can make use of mathematical techniques and algorithms created by others instead of programming yours from scratch.

Usually, setting up your own trading bots is a difficult and daunting task.  It requires major expertise in quantitative disciplines and then hard work to put this quantitative expertise to use in trying to model and predict the markets, hard work including many trials and errors. If you’re willing and able to put in that hefty work to do so, fine, but if you’re not, there are some software solutions for that, such as one we’ll suggest to you.


What we’re suggesting is a software suite where there’s access to a vast network of algorithmic trading bots harnessing the technical and mathematical knowledge and expertise of others. For example, MetaTrader 5 platform for hedge funds presents 13 000 ready-made solutions & robots. With these bots, you can choose and tweak your trading strategies while staying in tune with validated investment strategies put together by a network of global investors.

As a hedge fund trader, it’ll be optimal for you to make use of trading bots and automated strategies built by others instead of creating yours from scratch, especially when you have limited resources to do so.

As to computing resources, there are also online solutions where you can connect to servers hosted online to handle your trading operations. In this case, MetaTrader 5 also comes in handy, with direct access to this website called MQL5, a unique and very valuable property in its right. MQL5 is an online hub of distinct groups where traders get access to distributed computing resources on the cloud to test and analyze their trading strategies on real-time or historic data. You know, with cloud computing, it’s easier and faster for you to deploy your algo models and tests.

Distributed computing resources are very important for traders building and testing algorithmic trading systems and strategies. It’s easier to build stronger systems when you can train it on a vast amount of data available and accessible via the net, i.e. “cloud”.

With direct access to the MQL5 cloud computing network, hedge fund traders can easily test and judge the performance of their trading strategies without risking any loss in the process.

These kinds of features make it easy for traders to adopt sound algorithmic strategies and are one that should excite any hedge fund trader.


Algo trading is a validated strategy for hedge fund traders, ranging from small ones in the million-dollar range all the way to the big ones we know of. It provides a level-playing field for both the big investor and the small one alike.

With state-of-the-art tools around, you can be put in the best position to implement algo trading as your strategy. After that, the rest is up to you, at least the best effort you put in. But, to note, you’ll be in competition with many other algo traders globally so you have to work with that in mind.

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