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Things You Didn’t Know About Algorithmic Trading

Algorithmic trading, also known as “automated trading” has proven to be the most preferred way of trading global assets online. Algorithmic trading is termed as the process of using computer programs to follow a defined set of instructions for placing a trade in an attempt to generate profits in lesser time than a human trader. Algo trading makes markets more liquid and makes trading more systematic by ruling out the impact of human emotions on trading activities. It lowers spreads and commissions; and as such it is commonly used by large institutional investors as they purchase large number of shares every day. Nowadays, people are too busy and hardly have time to sit in front of a screen to analyse trends of assets. Since algorithmic trading is fully automated, this encourage most investors to opt for Algo trading. While going through the Algorithmic way, you only have to choose your strategy and let your computer do the heavy task for you. Computers have the power to scan hundreds of assets and execute as many profitable orders in a matter of seconds. Hence, it is better to let the machines do the tasks for you while you can focus on enjoying a profitable journey throughout. Understanding algorithmic trading can be tricky, this is why everything has been explained in greater details here.

But for now, let us have a look at 5 things that we believe people should know about Algorithmic Trading:

1. You can start today, there’s no age to learn

Age is just a number when you are learning, what matters most is the experience you get out of it and if you are ready for new challenges. Some investors believe that learning takes time – this statement is true but it gets better with time, just like wine. You can pick up an Algorithmic Trading course online, read more about how it functions or watch videos. Once, you have mastered the skills, no one can stop you from reaching new heights. While being automated, the user has nothing to do and the education part is also very little compared to when you opt for the traditional trading.

2. Minimizes emotions, Human Emotions = 0

Automated trading systems minimize emotions throughout the trading process as the system trades on your behalf and you just have to sit back and enjoy your profits. By keeping your emotions away, it becomes easier to stick to your plan. Trades are executed automatically once the trade rules have been met and thus you don’t have to worry about missing to include the stop loss or take profit. When you realise that the majority of trades in the market aren’t driven by emotions, it automatically prepares you to opt for the Algo method so that you truly get a fair chance of using your strategy at its best.

3. Prepared to be disciplined

While opting for the automated trading system, discipline is preserved even in volatile markets; you don’t need to stress about anything. For instance when you opt for trading manually, you have to calculate the losses and you may thus be disappointed to place more trades. However, it is easier to place orders when you use Algorithmic Trading; and it prepares you to be more disciplined as you would want to follow a pattern while trading. Automated trading helps ensure that discipline is maintained as it has its own strategy and you need to be rest assured that a trading plan will be followed. There is less chance of making errors and everything is already calculated for you, no need to go under the drill again.

4. Reduced cost and time

As trades are monitored by the algorithms itself, investors don’t need to follow up on stocks frequency or stay glued in front of their account. This definitely saves time and money giving you more time to explore the market and focus on new opportunities. Even a skilled investor will take at least 10-15 seconds to place an order, during this time, the price can move significantly on the market. For a machine 10-15 seconds is an eternity, algo trading can place multiple orders for you in the time period. Furthermore, Algorithms continuously calculate risks and hedge to a position accordingly; and also monitor the smallest changes in exchange rates, leading to faster execution of currency exchange.

5. No need to invest huge capital

Some investors believe that algorithmic trading cost too much and they refrain from using this option. However, this is not always the case as it is not the number of trades done but the way in which you trade and the strategies you use. Likewise, with the proper set of skills and tools, you can procure the best equipment suited for your needs instead of spending on expensive equipment. Hence, by using algorithmic trading, you let the system calculate and manage risks on your behalf while you focus on developing more efficient strategies which could help you avoid being victim of losses in the near future.

6. Even individual traders can do Algorithmic Trading

Being an individual trader does not stop you from doing Algorithmic trading. Instead, it gives you an equal opportunity to either make money. You do not need to compare large companies and individual traders due to the varied nature of investments and returns. Even though you start as an inexperienced trader, you can slowly step on the ladder of success once you start implementing your well calculated strategies. However, you can also shift out of your comfort zone and choose Algo trading while you devise some other strategies. Anyone having a knowledge and understanding of the markets can do Algorithmic Trading for a more fruitful experience as there exist countless success stories that can be an inspiration for individual traders.

You can start today…

Algorithmic trading is the future and eventually more and more people are converting to Algo because of multiple benefits offered by this form of trading. If you want to learn more on Algo Trading, then you can have a look at our article on "What is Algorithmic Trading?" If you want to get more practice about Algorithmic Trading, then you need to enroll now and so that you get the chance to make maximum use of your account and the amazing opportunities awaiting you. Start today.

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