With perpetual innovation in technology, all the existing sectors are racing for the betterment of humankind. Even the prospect in trading\/investing has witnessed immense changes.The most recent buzzword in the market regarding investing is \u2018Algo-trading\u2019 or \u2018Algorithm Trading\u2019. <\/p>\n\n\n\n
What is Algo Trading?<\/strong><\/p>\n\n\n\n An algorithm is a specific set of clearly defined instructions aimed to work on a specific task or process. In the past though trading\/investing did look fancy but the maintenance took a huge toll. Coupled with instances brimming with human error, it became impossible for traders to handle enormous numbers for trading, and the necessity cladded with innovation just stepped in!<\/p>\n\n\n\n And hence intervention of an intelligent algorithm!<\/p>\n\n\n\n This Algorithm trading is trending highly because High net worth individuals have a huge demand. Dealing with these mathematical algorithms which analyse every quote and trade in the stock market<\/a>, identify liquidity opportunities, and turn the information into intelligent trading decisions. <\/p>\n\n\n\n This computer-oriented trading, proves useful to cut down transaction costs, and allow investment managers to take control of their own trading processes. <\/p>\n\n\n\n Isn\u2019t that amazing!<\/p>\n\n\n\n Therefore it\u2019s the two ways to reap the benefits. The algorithmic trading strategies follow defined sets of rules, and are based on timing, price, quantity or any mathematical model. Apart from profit opportunities for the trader, algorithmic-trading makes markets more liquid and makes trading more systematic by ruling out emotional human impacts on trading activities.<\/p>\n\n\n\n Let\u2019s consider an example from a technical aspect;<\/p>\n\n\n\n A person sets the \u2018buy\u2019 trigger (writes program in this form) on 100 shares of a stock, when it’s 100-day moving average goes above the 200-day moving average. And likewise sets \u2018sell\u2019 trigger to sell shares of the stock, when its 100-day moving average goes below the 200-day moving average<\/p>\n\n\n\n Using this set of two simple instructions, a computer program can be written that will automatically monitor the stock price (and the moving average indicators) and place the buy and sell orders when the defined conditions are met. <\/p>\n\n\n\n Here the bonus point is there is no manual intervention required.<\/p>\n\n\n\n The computer is all eyes.<\/p>\n\n\n\n In our case, it is JARVIS<\/a>!<\/p>\n\n\n\n There is a big relief in knowing that a retailer\/investor no longer has to monitor the live prices and graphs, or place orders himself. <\/p>\n\n\n\n This algorithm does his work for him very efficiently.<\/p>\n\n\n\n Let\u2019s have a look at algo- trading\u2019s upper hand in different trading\/investment activities.<\/p>\n\n\n\n
Algo trading is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for a human trader. Any strategy for algorithmic trading requires an identified opportunity, which is profitable in terms of improved earnings or cost reduction. <\/p>\n\n\n\n
Benefits of Algo Trading<\/strong><\/p>\n\n\n\n\n
When we discuss Algo-trading in literal senses we are focusing only on extra bonuses because it is totally computer oriented which also means it has zero tolerance for emotional intelligence. <\/p>\n\n\n\n