Launching an algorithmic trading business is an ambitious project that requires careful planning and rigorous execution. Here's a detailed plan for starting such a business:
1. Feasibility study (1-3 months)
- Market research: Analyze the current algorithmic trading market. Who are the major players? What is the size of the market?
- Niche identification: Look for less saturated sectors or markets where you can add value.
- Financial study: Estimate the capital required to start up and operate, forecast costs, and expected revenues.
2. Business plan and strategy (2-4 months) Mission and vision: Define your mission and vision.
- Mission and vision: Clearly define what you want to achieve.
- Strategy: How will you operate? What algorithms or trading strategies do you plan to use?
- Organizational structure: Who are the key team members? What roles will they play?
3. Legal and regulatory framework (3-6 months) **Choosing the legal form
- Choice of legal form: For example, SARL, SAS, etc.
- Licenses and regulations : Trading is highly regulated. Make sure you obtain all necessary licenses.
- Protection: Put measures in place to protect your algorithms and intellectual property.
4. Fundraising (4-8 months)
- Search for investors: Identify potential financial partners or investors.
- Project presentation: Create a solid pitch to present to potential investors.
5. Set up the infrastructure (5-10 months) Technology: Invest in the technology.
- Technology: Invest in high-performance servers, trading platforms and other technological tools.
- Security: Establish measures to guarantee the security of your systems against external attacks and internal failures.
- Test: Test your infrastructure to ensure that it runs flawlessly.
*6. Algorithm development and testing (8-14 months)
- Development: Write the codes for your algorithms. Make sure they are optimized for performance.
- Backtesting: Test your algorithms on historical data to see how they would have performed.
- Optimization: Based on the results of backtesting, make any necessary modifications.
7. Launch and operation (12-18 months)
- Pilot phase: Start trading with a small amount of capital to test your algorithms in real-life conditions.
- Evaluation and adjustment: Based on the results of the pilot, make any necessary adjustments.
- Full-scale operation: Once you are satisfied with the performance, increase your trading volume.
8. Ongoing evaluation (Post 18 months)
- Monitoring: Keep an eye on the performance of your algorithms.
- Adaptation: Markets are constantly changing. Be ready to adapt or modify your algorithms accordingly.
- Expand: Explore new opportunities or markets to expand your business.
Starting an algorithmic trading business requires a combination of trading, programming and business management skills. It's a competitive field, but with proper planning and solid execution, it's possible to succeed.
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