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Algorithmic (algo) trading has transformed energy markets, but we’re only scratching the surface of what is possible. Today’s energy traders manage up to 96 products simultaneously in fast-paced intraday and continuous markets — a complex challenge that’s increasingly beyond human capacity. Therefore, algos step in to handle the bulk of trades, bringing speed and precision to the table especially when trading frequencies skyrocket right before delivery time, while human traders focus on larger, strategic moves.
This is why in Europe, over 65% of power spot market trades are now performed by algorithms (source: trayport). This number is set to grow as the EU pushes towards market consolidation through initiatives like the European Green Deal (IEA) (European Commission) and the integration of renewables increases market volatility which makes algo trading essential to handle complexity and stay up to speed.
While algos are great at executing strategies, the human element remains important in setting up those strategies and configurating the algos accordingly. On average such a setup can take 1-2 weeks, and the algo only remains relevant for 4-6 weeks before it needs adjustments. This constant tweaking—though streamlined by standardized toolboxes—still consumes time and resources. This is where AI twill truly transform the game as it has the power to automate, and enable more efficient, adaptive systems to ultimately reduce costs.
But AI does not stop there. While setting up an algo may be straightforward, AI's ability to manage the data behind the trades elevates the trading to the next level. Figuring out which data is relevant, translating it for the algo, and enabling tech systems to communicate—is where AI can truly shine. As market conditions change, AI can automatically adjust strategies, cutting the need for constant human intervention.
In summary, algos have proven their worth as reliable executors, gaining trust in the energy market. Now, AI can take the reins, automating strategy development, analysing assets in real-time, and reducing the cost of strategy adjustments. This is just the beginning—AI will unlock new opportunities and contribute to make energy trading smarter and more sustainable.
At Re-twin Energy, we’re pushing these boundaries. The future is here—let’s take energy trading to the next level with AI!
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