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
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
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
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.