Over the last couple of years, there has been a steep rise in the number of platforms that sell “algos” or programs that trade strategies automatically on a client’s behalf. Some of these platforms claim that their algos have generated extraordinary returns in the past and can do the same in the future — all you have to do is click a button. The first thing to remember is that there is no easy way to make money, and if something seems too good to be true, it probably is, and it will very likely cause you to part with your hard-earned money.
While these platforms still seem small in terms of revenue and users, the lure of easy profits can quickly make them grow bigger. A number of such platforms have also been using the names of brokers without their consent, including Zerodha’s, alongside their offerings. They have started attracting regulatory scrutiny. We thought this is an appropriate time to post an explainer with everything you need to know about algo trading and such platforms selling automated trading strategies.