What are the benefits of algorithmic trading ?

[fxfarmerashik]

Hi guys, algorithmic trading or automated trading has changed the trading systems. Now, with automated trading, a trader can earn more profits in less time. Today, I will discuss some benefits of algorithmic trading.

Therefore, without wasting time, let's start.

Algorithmic trading (also called automated trading, trading in a black box or algo trading) uses a computer program that follows a set of instructions (algorithms) to exchange. Trade, in theory, can generate profits at a speed and frequency impossible for human traders.

The instruction set is defined according to any time, price, quantity or mathematical model. In addition to profit opportunities for traders, automated trading makes the market more liquid and trading more systematic, despite the impact of human emotions on trading activities.

• Benefits of trading algorithms
• Automated trading offers the following advantages:
• The trade is executed at the best price.
• The placement of trading orders is instant and precise (there is a possibility of high execution at the desired level).
• The trade is timed correctly and directly to avoid significant price changes.
• Reduce transaction costs
• Automatic controls simultaneously on various market conditions.
• Reduce the risk of manual errors when placing trades.
• Algo-trading can be retested using historical and real-time data available to see if it is a viable trading strategy.
• Reduce the possibility of mistakes made by human traders on the basis of emotional and psychological factors.

Quote

Most current algo transactions are High-Frequency Transactions (HFT), which seek to use the placement of a large number of orders at high speeds in various markets and several decision parameters based on pre-programmed instructions.

Algo-trading is used in various forms of trading and investing activities, including:

Investors or medium and long-term buying companies - pension funds, mutual funds, insurance companies - use Algo to buy large quantities of stocks when they do not want to influence the price of the shares by investing separately.

Short-term traders and sellers - market makers (such as brokerages), speculators and arbitrage - benefit from the automatic execution of trades; In addition, algo trading helps to create sufficient liquidity for sellers in the market.

Systematic traders - trend followers, hedge funds or two-way traders (neutral trading strategies that combine long positions with short positions in pairs of highly correlated instruments, such as two stocks, traded funds exchange (ETF) or currencies) effective to schedule their trading rules and let the trading program automatically.

Algorithmic trading provides a more systematic approach to active trading than intuition-based or trader-based instincts.

[RobertWillson]

One of the big reasons that algorithmic trading has become so popular is because of the advantages that it holds over trading manually. The advantages of algo trading are related to speed, accuracy, and reduced costs. Since algorithms are written beforehand and are executed automatically, the main advantage is speed.