Can you generate profit from algo trading strategies?

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Can you generate profit from algo trading
strategies? If youre a stock market investor or
are thinking about becoming one, this question
must have crossed your mind do algo trading
strategies help generate profit? If yes, then to
what extent? And most importantly, should you or
should you not opt for automated trading? In the
article below, well try to answer these
important questions. What you do when you employ
algo trading strategies is that you have software
where you enter certain algorithms to make
trades. Those algorithms basically enable the
computers to make decisions on their own in the
best interest of the investor as per the
prevailing market conditions. The most important
benefits of automated training is that you get to
do high-speed trading that is more accurate and
less emotion-based which could be a case if
youre doing manual trading. If humans are left
in charge of trading, regardless of how good they
are at understanding market behaviour they are
biased in certain biological ways that arent
very useful. For example, a human may sometimes
get overwhelmed with greed if things are going
good, and panic if things are going bad, which
may result in making of impulsive decisions. But
if you go for algo trading, since it is such a
sophisticated, powerful and unbiased system of
trading, you end up with best outcomes. The only
problem with algo trading is that you need to
spend a substantial sum of money to set up your
infrastructure. You also need to have a certain
level of technical knowledge in order to write
the algorithms and execute them correctly. But
once you set up the system, you can reap great
profits and quickly overcome your initial
expenditure. Now, to answer the question as to
what extent is algo trading possible, we need to
divide the investors into two separate
categories and analyze them properly. Those two
categories are institutional investors and
retail investors. Let us study them
briefly. Benefits for Institutional
Investors For institutional investors, algo
trading is exceptionally beneficial. The reason
for this is that they have a substantial capital
at their disposal. This essentially means that
they can do a very high volume of trade so even
if their profits per trade arent too huge, the
overall profits are magnified because of the
sheer volume of trades. Also we need to consider
the fact that the institutions pretty much have
all the necessary infrastructure and resources
that are essential to automated trading. They
have the personnel who can write workable
algorithms and they have the technical resources
as well to set everything up nicely therefore
they are able to reap substantial
benefits. Benefits for Retail Investors How
beneficial algo trading is for the retail
investors depends largely upon the competence of
those investors. If a retail investor, for
instance, has the technological acumen to be able
write profitable algorithms and has a large
reservoir of capital, then that investor can do
well in algo trading. The problem however, is
that without the large reservoir capital, which
is the case with many investors, the trade
volume is limited and the investor can generate
only a certain amount of profit. Moreover, the
retail investors also have to pay the brokerage
as well as transactional costs which further
lead to the reduction of profits. Yet, when you
compare it to traditional manual trading, algo
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trading is still more beneficial as a higher
volume of trades can be done in a much safer
environment.