Is Algorithmic Trading RIght for You?

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• Is Algorithmic Trading RIght for You?
• Introduction
• The stock market is always buzzing with activity.
  Trading is all about a keen eye for the ups and
• downs of the market. Investing in stocks requires
  knowledge, speed, and flexibility, among several
  different things.
• There are new methods to achieve more profit from
  the stock market, such as Algo Trading. The basis
  of Algo trading is cashing on the hidden and
  quickly emerging patterns in trading which human
  being can miss. Machines can be programmed to
  read previous designs and read quickly emerging
  ones, thus bringing out the opportunities to
  trade profitably.
• One of the reasons as well for its emerging
  popularity can be that earning is much more
  through algo trading than trading manually.
  Before jumping into the question of Is Algo
  Trading right for you? it is necessary to
  understand the basics. Well cover a few
  terminologies here and then go further to
• answer the question.
• Algorithm Trading
• Lets start with understanding the term- Algo
  Trading.
• Algo is short for the Algorithm. The steps you
  perform to achieve the desired result as an
  Algorithm. You set these instructions for the
  machine to process and execute. Trading is the
  transaction of stocks. To summarise, algo
  trading is when you define an algorithm to the
  machine for selling and buying shares. The
  Algorithm will be implemented when the conditions
  specified for the transaction are met.
• How can Algo Trading be helpful?
• Different aspects play an essential role in the
  buying and selling of stocks. Some of the causes
  of loss in the stock market can be
• Inconsistency in decision making
• Inadequate analysis of the market
• Little to no knowledge about the current market
  scenario, etc.
• This is where algo trading strategies can help.
• The psychological aspects of stock trading can be
  controlled through the algo trading strategies. A
  machine doesnt have any emotional inclination.
  Thus it can strictly follow the consistent
  trading system instructions. Also, there isnt
  any comparison between the speed and frequency of
  a human and a machine.
• Algorithm trading and Intraday Trading
  Strategies

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• Intraday trading strategies differ depending on
  market conditions. Intraday traders need to be
  quick. Speed and knowledge about the market are
  crucial factors in intraday trading. This is
  where algo trading comes into play. The machine
  can process and execute the steps for the
  transaction at a much quicker pace than a human
  trader.
• Are algo trading and automated trading the same?
• Algo trading can either be semi-automated or
  completely automated, according to the choice of
  the human trader. Thus, people often use
  automated trading and algorithm trading
  interchangeably. However, both terms are not
  necessarily the same.
• Algorithm trading is when the execution of the
  process is done based on the set of written
  instructions
• (or Algorithm). On the contrary, automated
  trading is the complete automation of the buying
  and selling process of stocks. Thus, the
  creation, submission, and execution of the order
  are entirely automated.
• Advantages of Algo Trading
• Now, coming back to our initial question of Is
  Algo Trading right for you? To know if something
  is beneficial or not, we must weigh its pros and
  cons.
• There are many pros of Algorithm trading, which
  outweigh the cons by a significant margin. The
• advantages usually cover the aspects which are
  the contributing factors in the thriving trading
  process
• Speed
• When doing Algorithm trading, algorithms are
  pre-written, and the instructions can be executed
  automatically. The analysis can be done at a
  faster speed, thus providing better
  opportunities. The machine, with the help of the
  Algorithm, can scan and implement different
  factors at a crucially fast pace.
• Accuracy
• In any business or trade, accuracy is the key to
  achieve successful results. Similarly, in
  algorithm trading, skill is essential. With the
  incorporation of machines in the trading process,
  common human
• errors are reduced.
• When a person is trading manually, many of his
  judgments can be a result of greed or fear. But
  in the
• case of machines, there is no room for such an
  error. The device strictly follows the Algorithm
  to process the transaction.
• To trade accurately, you can backtest the trading
  algorithm. Backtesting the trading algorithm is
  running the created Algorithm through the
  previously present data and studying its
  performance. In simple words, how viable the
  trading strategy is against historical data.
• Reduced Costs
• You dont need to supervise the market
  continuously. The trading process functions
  without it with the help of an algorithm. Also,
  there isnt any risk of losing your revenue. You
  have a lot more time to do other things as the
  time spent on supervising the markets is less.