Algo Trading


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Algo trading guide for beginners April 17 2021Algo Trading

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Algo trading guide for beginners

Artificial Intelligence is widely used all over the world to carry out certain complex tasks easily without any human intervention. Algorithmic trading is a part of AI. Algo trading consists of pre-defined set of rules and parameters set up in the operating system of the trading application. Whenever such parameters trigger in the market, the system or machine directly enters or exits a position without any human intervention. One just needs to set the stoploss and target price on a particular price band and the positions will be secured on the basis of algorithmic parameters.

Algorithmic Trading Strategies

A workable algorithm is created after back testing certain strategies and determining whether these strategies can be profitable or not.

If you trade manually as a beginner, you can make mistakes and turn your money into losses. After making losses you gradually start doubting your investment strategies and decisions. The biggest advantage of Algo-trading is that it is emotionless. It doesn’t matter whether a person is making a profit or loss, the algorithm just keeps on trading without emotions unless it is ordered to stop.

High frequency of trades can be implemented within milliseconds with the help of Algo-trading. Trusting the back testing process makes it even better to trade in algorithms as it gives you a gist of how a strategy would work if it was implemented in the past. 

Scalable model- Algo trading provides a scalable model wherein beginners can invest in large number of lots at the same time. Investing and maintaining large number of lots becomes very challenging and difficult when trading manually. With the help of algorithms one can invest in large number of lots simultaneously.

A trader doesn’t need to sit for whole day in front of the screen to take positions and end them. All the operations can be carried out through algorithms without sitting in front of screen. You don’t have to worry if you can’t trade on a day or two, machines will do the trading for you.

Almost 65-70% of trading is carried out through Algorithms in the share market. And it is expected to reach 90-95% in the coming future which indicates that investors are getting great results from algo.

Beginners can use algo trading to successfully carry out trading activities without any hassles and long trading hours. Experts believe that future lies in algo trading and one can make good amount of money through it.

Algo trading eliminates greed, fear and emotions from trading and carries out trades which is impossible if it is done manually as humans can’t function without emotions, fear and greed.

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  • 9 out of 10 individual traders in equity Futures and Options Segment, incurred net losses.
  • On an average, loss makers registered net trading loss close to ₹ 50,000.
  • Over and above the net trading losses incurred, loss makers expended an additional 28% of net trading losses as transaction costs.
  • Those making net trading profits, incurred between 15% to 50% of such profits as transaction cost

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