Algorithmic Trading UK – Beginners Guide

If you are someone looking for detailed information on Algorithmic Trading then this guide will be very helpful for you. As in this guide, we will explain to you what Algorithmic trading is, what its types are and how you can get started with it today. So, without further ado let’s get straight into our topic. 

Algorithmic Trading UK - Beginners Guide

Algorithmic Trading is becoming more attractive to traders with each passing day and has proven itself highly beneficial. It uses the latest technology and advanced artificial intellectual features to identify highly profitable trading signals whilst trading bots can be used for setting up to open and close trades automatically on the basis of the pre-defined trading parameters on the behalf of the users. 

Best Trading Platforms for Algorithmic Trading 

There are a variety of trading platforms that offer you to trade through algorithmic trading. But not all the Platforms that give you access to Algorithmic Trading are reliable. There are a few important metrics that must be taken under consideration while choosing a trading platform. However, going through all these things can be very time consuming and hectic. That’s why to save you your energy and time we have listed down the best trading platforms that are available in the market today for Algorithmic Trading. 

eToro- Overall Best Algorithmic Trading Platform in the UK

The very best trading platform which gives you access to algo trading is eToro. Other than this it gives you access to a variety of trading assets from stock, ETFs, CFDs and cryptocurrencies. The platform is easy to navigate even by the new traders. It is the most favourite trading platform of UK Investors because it provides you with a variety of trading features. This platform allows you to trade stocks that are listed on the London, New York and Tokyo exchanges. On this platform you are allowed to apply the leverage of up to 1:5 and even you can buy assets traditionally. 

The platform is further regulated by the FCA, ASIC and CySEC. Even the platform is accessible to US traders as it is also registered with FINRA. Except you will be required to pay a 0.5% fee on all your deposits and $5 on every withdrawal. It is the cheapest brokerage platform in the UK.

For those who are willing to engage with algorithmic trading then eToro is the best platform as it provides the copy trading feature. This feature allows you to copy ongoing trades of expert traders. You can also use the copy portfolio feature, which allows you to diversify your investment portfolio. Unlike other platforms, account creation on this platform is not time-consuming.

eToro Copy Trading

It takes only a few minutes to create an account on eToro. Once you are done with creating an account you are then required to fund it to start your trading journey. For the convenience of its user’s, it accepts various payment methods for making a deposit such as Debit/Credit Card, Bank account, e-wallet e.t.c. The fee attached to the platform is an inactivity fee of $5, which is understandable and also the spreads are relatively low. The platform also offers a mobile application for the convenience of its customers. This trading platform also offers 24/7 available customer support which other free platforms don’t offer.

Pros 

  • Beginner-friendly 
  • Regulated by  FCA, ASIC and CySEC 
  • Copy-trading and Copy Portfolio feature 
  • Offers a variety of financial assets 
  • Accepts debit/credit, bank account, e-wallet
  • Fractional trading 

Cons 

  • Not suitable for advanced learners

IG- Best Trading Platform for Algorithmic Trading

IG- logo

Another amazing platform we have on our list is IG. This trading platform was launched in 1974 and since then it is known as the most popular trading platform for CFD trading. This platform gives you access to the algorithm trading as well as to other trading assets to diversify your trading platform. It is regulated by FCA, which means you don’t have to worry about the safety and security of your funds. The platform gives you access to over 12,000 assets and allows you to apply the leverage of up to 1:200 on forex pairs like EUR/USD, EUR/GBP, EUR/GBP, EUR/JPY, and USD/JPY. That means with an account balance of just $300, you could potentially trade with $60,000. What attracts the traders most to this platform is that it gives access to over 80 currency pairs. 

The account creation on this trading platform is also super easy. However, you do need to pay an entry-level fee of £8. But the good thing is that if you trade regularly then this entry-level fee will be reduced to £3. Once created an account you will be required to make a minimum deposit of $250 on this platform to initiate trading. This minimum deposit isn’t the fee of this platform but the working capital that is needed by the investors to start investing journey.  

For those who are willing to use algorithmic trading, IG is one of the best trading platforms as it is partnered with Pro Real Time and Meta Trader 4 and its native API. Pro Real is one of the best algorithmic trading software globally. 

Pros 

  • Well reputed UK Broker 
  • Offers more than 12,000 traditional assets
  • Offers leverage and short selling
  • Offers spread betting and CFD products
  • Offers educational tools 
  • Offers more than 80 pairs 
  • MT4 is supported 

Cons

  • Trades instruments through CFD onlly

Capital.Com- Best Algorithmic Trading Platform for CFDs

Another trading platform that we have on our list is Capital.Com. This trading platform is well suited for novice traders as it allows traders to get started with a minimum deposit of $20. Furthermore, the platform is compatible with all devices such as mobiles, PCs and so on. This trading platform also offers a demo account feature so that its traders can have a seamless trading experience. This trading app is regulated by the FCA and CySEC and accepts payments from a variety of modes that are debit/credit cards, e-wallets, and bank transfers. It also offers a variety of trading assets including indices trading, hard metals, cryptocurrencies, energies, ETFs and even DeFi coins so that you can have a well-diversified trading portfolio.

Capital.Com- Algorithmmic Trading

The only thing that you should consider while choosing this trading platform is spreads as on this platform spreads are highly competitive on major blue-chip stocks. As the platform is a well known CFD trading platform, that means it allows you to apply leverage and as well as short selling. If you are willing to use algorithmic trading then this platform is one of the best trading software in the world as it offers Metatrader4. It offers desktop, mobile, and web-based versions for a variety of multiple operating systems for its systems and can be easily downloaded and installed. This MT4 interface is pre-installed indicators that are used for identifying trading signals, while EA (Expert Advisors) on the other hand enables you to follow algorithmic trading strategies. 

Pros 

  • Regulated platform 
  • 0% Commission 
  • Offers a variety of trading assets
  • Spread betting for UK clients
  • Beginners friendly
  • Offers minimum deposit of just $20 
  • Offers Metatrader4
  • Offers algo trading

Cons 

  • CFD only
  • Not suitable for advanced traders 

Libertex- Best Algorithmic Trading Platform for Forex

Another amazing platform that we have on our list is Libertex. This CFD trading platform was launched in 1997 and is ideal for those looking to diversify their trading platform. And, if you have an eye for Algorithmic Trading then this platform is your go-to platform. The platform also provides MT4 and MT5 and also a mobile application for the convenience of its traders.  This trading platform offers leverage of up to 500:1 for professional clients.

libertex- Agoritic Trading

The platform allows you to enter and exit the market without paying a spread. However, you will be required to pay a minimal amount as a commission which in any case will be less than 0.1%,  though many of the financial markets can be traded commission-free with Libertex. Moreover, the platform is completely safe to use as it is regulated by CySEC and FSA and also has a reputed history of more than 20 years. Libertex for the convenience of its traders also offers a free demo account feature that allows paper trading to practice trading without investing in your real money. 

Pros 

  • Regulated trading platform 
  • Minimal commissions 
  • A well-reputed history record 
  • Compatible with MT4 and MT5
  • Offers a variety of financial investment assets
  • Offers zero spread CFD trading 
  • Offers Algorithmic Trading

Cons 

  • Only CFDs are available.
  • Offers around 50 shares only

AvaTrade- Best Algorithmic Trading for Options Trading

AvaTrade logo

Another Meta Trader4 broker that we highly recommend is AvaTrade. This broker is one of the safest MT4 brokers as it is highly regulated by a variety of regulatory bodies from around the globe. It offers a variety of alternatives to execute Algorithmic trading strategies including Meta Trader 5 Algo Trading and copy trading via Zulu Trade and Dupli Trade. The minimum deposit required is $2000 for the DupliTrade to gain access to the Portfolios of hundreds of strategy providers. However, on the other hand for accessing the Zulu Trade the minimum deposit amount required is lower than £500 to gain exposure to more than 10,000 traders portfolios. 

The platform gives access to a variety of trading instruments from more than 1200 markets to choose from and it also offers borderless business dealing. This MT4 broker is one of the most competitive brokers as it has an average of 300,000 trades per month.  When talking about accounts for trading, this broker offers a long list to choose from, whether it is spread betting or Islamic Swap-free accounts. This MetaTrader4 broker is highly liquid and the spreads offered by this platform are highly competitive. On this broker, traders can access a variety of educational and research tools including videos, articles, and a blog.

Pros 

  • Regulated MetaTrader 4 broker
  • Offers 24/7 cryptocurrency trading
  • Offers a variety of trading instruments including stocks, indices, commodities and cryptocurrencies.
  • Allow you to access a variety of trading features
  • This MetaTrader4 broker is compatible with all the devices
  • Offers Algorithmic Trading

Cons 

  • Offers minimum deposit of $100

What is Algorithmic Trading? 

In algorithmic trading computers and software are used to open and close trades according to the pre-defined rules set by the human user. Once the pre-defined criteria match with the current market conditions, the trading algorithm executes a buy or sell order on the behalf of its user. Simply put, algorithmic trading software trades on the behalf of its users saving them time and energy by eliminating the need to manually scan the markets. 

Advantages involved in Algorithmic Trading

Following are the top reasons that will make you start today with algorithmic trading. 

  • The very first reason that makes algorithmic trading more attractive is that it lets you trade without letting emotions get in your way as algorithmic trading trades on your behalf according to your pre-defined rules and strategies. 
  • Another major reason is that it requires low maintenance as it trades according to your pre-defined schedule. 
  • Another reason being is that Algorithmic trading maximizes your exposure to the desired market with automated buy and sell orders. 
  • Algorithmic trading allows you to backtest your trading as it allows you to refine your strategy against historical data so that you establish the best combination of buy or sell parameters. 

Risks involved in Algorithmic Trading

  • See, there are always drawbacks to advantages. While downloading any app or any automated trading software we all have probably seen those websites and apps which claim to turn us into a millionaire overnight. The Robot Trading marketplace generates different scammy software that in reality do not have any real trading basis behind them. They are just frauds with clever marketing skills to make money.
  •  It is more like our drawback. Basically, if we are told that this thing is automatic, we expect it to give results without us putting any effort into it. We often forget that in order to get something out we need to put something in. This is the same with algorithmic trading software. We expect algorithmic trading software to solve the problems without putting any work into them. Always remember that whatever a robot software itself is going to achieve, is going to be based on the criteria that we tell it to perform.
  • We definitely do not want to miss any opportunity in the trading market. We want to capitalize on the opportunities right away since opportunities in today’s marketing are short-lived. In order to not miss any opportunity, we need a well-designed trading system with a quick connection. This is where algorithmic trading software or robot trading software helps us. But sometimes this speed can make a huge loss instead of making a profit. Imagine if you change your mind and suddenly want to close your algorithmic trading software but before you can do so, it takes your trading because it is insanely fast. This is where speed becomes an issue. 

Types of Algorithmic Trading 

Below listed are the most popular algorithmic trading programs and software that you can use to engage in algorithmic trading. 

Bots 

Trading Bots are fully automated Expert Advisors or EAs.This is a programmed trading system that offers automated buying and selling of assets upon pre-defined rules. These are also referred to as mechanical trading systems, algorithmic trading, automated trading, or system trading.

These trading robots or bots are popular for a variety of reasons. In these automated trading bots,  trades are automatically placed once certain criteria are met. One of the major reasons for its popularity is that it takes emotions out of the trading. Sometimes, emotions come in our way and it becomes very hard to do trading as you cannot make a particular decision. But with trading bots, this is not a concern because trading robots do the exact opposite of anything with emotions since they are pre-programmed to follow a certain set of rules and nothing more. It enables you to carry out numerous trades in a small amount of time. Trading Bots are never tired, they can trade tirelessly. They can trade 24 hours a day, 7 days a week, 365 days a year.

Alert Bots ( Semi-Automated)

Another way to approach algorithmic trading is to use Alert Bots; however, Alert Bots involves a degree of human intervention. In this trading, bots keep on scanning the market constantly on the basis of the trading parameters that are established by the human user. Whenever these bots identify a signal that matches the trading parameters established by the human user, an alert or a notification is sent directly to the user so that he can make one last final decision on whether or not he wants to open a position in the desired asset. 

Copy-Trading

This feature allows you to copy ongoing trades of expert traders. The minimum size of a copy is $1 so you should make sure you have sufficient funds in your account to be sure to copy all the trades by the trader you are copying. 

Copy Portfolio

Copy Portfolios is an incredible feature that takes Copy Trading to the next level. It helps traders to diversify Portfolios, minimize long-term risk, and to take advantage of current market opportunities. In Copy Portfolio investment, each portfolio is periodically rebalanced so that its users can get the most out of the thematic trading strategy. To use this amazing feature, you first need to create a trading account on eToro’s official website. 

How to get started with the Best Algorithmic Trading Broker? 

If you have made up your mind on engaging with algorithmic trading then below is a step by step guide you can follow to sign up with your desired broker, however, here we are taking eToro as an example. 

Step 1: Create an Account 

The very first step is to create an account on the official website of eToro. To do so, you are required to fill in a registration form by entering in your basic details such as your name, phone number, e-mail address, and setting a strong password. After entering all of your details make sure to accept terms and conditions. 

eToro Step 1 create an account

eToro will ask you to verify your identity by uploading some of your documents, don’t worry as your documents are truly safe on this platform. However, you don’t need to undergo verification until you deposit more than $2,250 or you request a withdrawal. 

Step2: Fund your Trading Account

Now that you have successfully registered on this platform you are now all set to fund your account by making a minimum deposit of £160. This funding amount isn’t the fee of the robot but the working capital that is needed by the traders to execute trades. eToro offers several payment methods for the convenience of its traders, you can choose whatever method you feel more comfortable with. The payment methods supported by eToro are Debit/Credit Card, PayPal, Skrill, Nettler, and Bank Transfer. 

Step 3: Identify the Traders or Portfolios you would like to copy

eToro Step3 Identify Trades

On the eToro platform’s interface, you will find a panel where you will find the Copy people and invest in Copy Portfolio Options. Through the hundreds of alternatives available within the platform, you can click on any of the two options. The “Copy People”  option will allow you to mirror individual traders by performance, markets, geographical location and other similar criteria. While on the other hand, the Copy Portfolio feature allows traders to follow top traders within the platform partners themselves, who have great top quality portfolios. 

Step 4: Copy your First Portfolio 

Once you have made up your mind on which trader or portfolio you want to copy, you can then click on the options then on the ‘invest’ button which is located on the upper right corner of the trader of the portfolio’s individual page. The minimum amount to start investing on this platform is $1000. It further allows you to set stop-loss orders to mitigate the risk involved. 

Bottom Line 

Summing everything up, algorithmic trading may sound complicated but it can enhance your trading journey if executed correctly. The platform that we recommend the most for algorithmic trading is eToro as it provides you with the utmost security and features. Anyhow you are free to choose any platform of your choice but make sure it is regulated by a regulatory or financial authority.

FAQs 

  1. What is Algorithmic Trading?

In algorithmic trading computers and software are used to open and close trades according to the pre-defined rules set by the human user.

  1. How does Algorithmic trading work? 

This depends on the type of Algorithmic trading you are using, however, the goal of algo trading is to either trade automatically without the involvement of humans or notify the human user once a trading signal has been spotted. 

  1. How profitable is algorithmic trading? 

Algorithmic Trading can be highly profitable if done right however this hugely depends on how effective your trading system and how effective a trading system depends on various factors including winning rate, exit prices. 

  1. Which is the best trading platform for Algorithmic trading? 

Above are listed a few best trading platforms for algorithmic trading, you can choose any platform that meets your financial goals. However, if we have to choose the one among all the listed ones, we will recommend you to choose eToro. 

  1. What are the benefits of Algorithmic trading? 

Algorithmic Trading has various benefits. Most notably, using algorithmic trading eliminates the emotions from your trading which can be very dangerous for your trading journey. Other benefits include time-saving, backtest, low maintenance, increased opportunity with instant execution.