How can a Trader fully automate their trades with algo? What are the formalities and cost?

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First thing to know about automating a strategy is that it is not allowed for a retail trader by the regulators. Why not? hmm..Because regulators feel that Indian retail is not mature enough to handle automation, when a small change in the code of the strategy can be very damaging. 

But if you need to automate here is the process: 

  1. You need to first have a strategy that makes money, and this can be done by coding it and then backtesting/paper trading. To be able to code a strategy, you will need an interface like an Amibroker, Metastock, Multicharts, and others and then code using the respective scripting language. Some people also build custom UI which can use C#, .NET and other popular languages to code strategies. Cost for AMI, Meta, and others are around Rs 20k, you will also need data feeds which might cost between 2k to 4k per month. 
  2. Register as an authorized person with the exchange through a brokerage firm. You need to do this, so that you can get dealer terminal access which is mandatory for automation. The cost based on which broker, might vary between 6k to 20k for registration on the exchange. The cost of dealer terminal might vary between Rs 500 to 5k per month. 
  3. If the strategy is built on custom UI, you will need API access from the brokerage you are trading. The cost could be between 10k to 15k per strategy per month. 
  4. If the strategy is written on AMI, Meta and others, you will still need an API to send the orders to the dealer terminal. You will need to find out from your brokerage, if they have such API, and the cost. 
  5. You will need to speak to your brokerage now, and get the strategy approved at the exchange by participating in mock trading. Brokerage might charge you between 3 to 10k for this, which will also include an auditors certificate. 
  6. The brokerage might charge you between Rs 3k to Rs 15k per month for providing this solution. 

Phew... I couldn't really keep this short, but the costs are pretty restrictive for a retail trader to automate unless he is a HNI. Need of the hour in India is a trading solution where you can write advance strategies on the trading platform itself, and be able to automate. There will still be costs, but would be a lot more convenient. 

Cheers, 

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