What is Algorithmic trading?

Advanced mathematical models are used in Algorithmic trading, a trendy form of trading. The rules are fixed in the algorithm to judge the best time to take a trade in the stock market. The algo trading technique is used by big institutions that purchase and sell large blocks of shares daily.

Advantages Of Algorithmic Trading

Algorithmic trading is a widely accepted strategy as the choice to buy or sell a share is merely the foundation of the composite programs. There is no human interference when making the trades that keep aside emotions.

Computers are proficient in working faster than humans. It can execute and track a range of parameters on different stocks at a given time.

This makes it very competent and resourceful as no trades get missed. The robot takes care of executing the orders on online share trading when the traders rest.

Disadvantages Of Algorithmic Trading

The algorithm is merely reliant on what you provide into the system. It does not have its intellect. Consequently, with no ability to logically adapt to changes in the market, algo trading loses out to human trading.

The trading strategy is based on back-tested research. Hence, any development in the market state of affairs will not furnish into its programs until the algorithm is changed to regulate those changes.

Generating an algorithm is not an easy task and needs hours of work. To code the computer programming language, a person has to be hired with adequate knowledge.

Periodic alterations have to be done from time to time for changes. This becomes a time-consuming and expensive one.

Back-tested data is taken into account for feeding the system. Remember, these are not facts but only based on assumptions that these historical patterns will repeat in the future. Trading through computers becomes an option for the trader based on his comfort zone.