Algorithmic trading is proving to be the future of trading.
Faster than a millisecond, algorithmic trading uses a set of predetermined commands to solve a problem through an automated process of pre-programming trading instructions.
These instructions include codes to account for variables like volume, timing, and price.
Generally, algorithmic trading is carried out through computer algorithms where small portions of the full order are carried out in the market over time.
Comprised of complex formulas and equations which are formulated by human oversight and mathematical models, algorithmic programs can make decisions on when to buy or sell financial securities on an exchange.
Through high-frequency trading technology, algorithmic traders often generate tens of thousands of traders per second which widens its application suitability in a vast array of situations such as trend trading, order execution and arbitrate strategies.
Enabled through the yielding of technology in the early 1980s, algorithmic trading now constitutes the majority of online trade transactions while coming at a cost.
This cost can result in flash crashes and an immediate loss of liquidity.
Despite the evolution and dependency upon algorithmic trading, there are still advantages to algorithmic trading that should be weighed for retail forex traders.
Speed
The ultra-precise and near-instantaneous execution through algorithmic trading are unparalleled and unmatched with human capability.
Combine that knowledge with how these advanced and pre-programmed software interfaces are capable of accounting for several thousand historically-known and researched trading scenarios along with a trade execution that is over an average of a hundred times faster and it becomes clear-cut who the more precise market participant will likely be.
Investment through technology is critical for retail traders who want to level the playing field.
Trade Strategy Automation
Many trading strategies are formulated to account for certain trading conditions.
These trading conditions are oftentimes based upon historical trading scenarios that unfolded once in real-time and a strategy proved effective during the condition.
Through algorithmic trading, trade strategy automation is possible for every programmed trading scenario accounted for in the system.
Now multiple that by several to tens of thousands of pre-programmed trading scenarios that can analyze all of these trading commands within milliseconds and execute trades no less than 100 times faster for the best possible trading rates and you can better appreciate the power of algorithmic trading.
There have been two notable evolutions in the financial markets.
First, the diminishing of trader desks to virtual banking.
Most of the trading is completed in a virtual and automated environment.
The second evolution would be the reliance and implementation of algorithmic trading due to its broad scope of advantages and the best possible trading rates.
More advantages coming shortly.
Mitigating Emotions
One of the most difficult shifts that traders have to do is looking at their online investing as a business rather than a casual hobby.
You have to want to learn more about it, to want to succeed at it, to put yourself in the best position to excel.
Then, of course, we have the flip side of the coin and we have those that need a slight ego-boost.
We are emotional beings and trading without emotions, like a robot, is the best way to remove trading emotions from the trading equation which has been proven the plague the user with problems.
Through automated trade entries, exit, stop losses, take profits, strategy automation and execution, and user-picked predetermined trading strategies that investor has more power than ever to generate a return with the financial markets.
This is done through faster trade automation and using only mathematics to formulate the best trading scenario for profitability as opposed to being subjected to human greed and emotions.
Backtesting & Foundation Laying
Backtesting and fine-tuning trading strategies are at the core of algorithmic trading.
Perfect trading strategies to work optimally during certain market conditions in an automated trading capacity while trades sizes, positions, and parameters are autonomously computed as a byproduct of fixed user commands programmed into the solution.
Backtesting is the bread-and-butter that makes algorithmic trading effective and uniquely specific.
Improved Accuracy
Improved accuracy is a complementary effect of optimized trading strategies done through backtesting, the removal of trading emotions along with the unparalleled trading speed, and trading commands.
High-frequency trading is possible through algorithmic trading.
Both of which are revolutionizing the way trading and investing as a whole are being done.
To learn more about powerful algorithmic trading powered opportunities, visit our Performance Page to learn about the best trading systems online.
