How Profitable is Algorithmic Trading?
This investing technique recently turned 50 years old. Such a milestone begs the question, how profitable has it become, and should you be using it?
The concept of algorithmic trading first saw the light of day in the early 1970’s, following the creation of the microprocessor. Fast-forward 50 years and it is now responsible for about 80% of everyday stock market trades. On top of that, a recent study showed that trading algorithms are responsible for 92% of Forex trades (Algorithmic Trading Methods).
Throughout the last five decades, algo-trading has appealed mostly to tech savvy investors (people with backgrounds in quantitative finance, data science, or software engineering) and institutional traders. But today, there are many tools out there to support the everyday investor who may be looking to add this process to their arsenal. Holistically and in theory, the investing process shouldn’t change too much when you install algorithmic trading.
To decide on a stock and acceptable price range to buy/sell shares, you will still need to leverage some mix of investing tools and analysis. Then, Algo-trading can be implemented to receive your input and place a trade (or series of trades) at the optimal price, time, and quantity…
