Why are traders moving towards algorithmic trading?
Few remain immune to the charms of the stock market, the bullish and bearish trends can be quite intimidating. In the fast-moving world, people don’t have the time to calculate every move they make and keep themselves regularly updated with the trends of the market. This is where technology steps in. With its promise to make human lives easier, the system of algorithmic trading has made it more convenient for regular traders to make their moves and buy their desired shares. Algorithmic trading simpli#es the process of evaluating the company’s financial position, market trends, and the expected future. This form of trading essentiall makes use of a computer program and follows a definite set of instructions to make a trade in the market. The specifications, including the time, date, price, the quantity of purchase and sale, are ascertained and stated. The algorithm follows these instructions to earn the desired profit. The sole responsibility that rests on the shoulders of the trader is to assess the stock he wants to purchase and at his desired price.
But how is it beneficial?
- Algorithmic trading allows a trade to be executed at such a price, where the predicted profit is maximum.
- The stock is purchased and sold, following clear and precise instructions. Therefore, there remains an astoundingly high chance of perfect execution and the achievement of the desired results. The transaction costs are significantly low, as the costs of regularly monitoring the market are removed.
- This unique method of trading eliminates the possibility of human influence. A human being may often be guided by his emotions of sorrow, excitement, distress, and tension over a transaction. This system gets rid of all such probabilities. Since the trade is made by a computer system, there is minimal human interference.
- While placing an order, there is a high chance of making a mistake and buying incorrect stocks. This is a problem that is easily solved by algorithmic trading. The computer system is less likely to make any such mistakes.
- The system has impeccable speed, trades are placed at the very second the stock price reaches the desired level and is sold in the same manner.
- This system is extremely reliable as it can be cross-checked by using real-time and historical data available in the market to check the feasibility and precision of the trading strategy.
- Algorithmic trading is extremely beneficial for short-term traders who are seeking profits. In such cases, the system is reliable and generates enough profit to meet their needs.
- With algorithmic trading, money can be made in milliseconds, once you get the programming right.
Algorithmic trading certainly exhibits great potential for development in India.
