What Is Algorithmic Trading?

Algorithmic trading is an investment mode based on a mathematical model that offers position-taking decisions instead of the usual trader. This method began to be developed in the 1980s thanks to the dematerialization of stock market orders. Remember that today, it takes barely 13 milliseconds to make a round trip by cable between the NASDAQ stock exchange and that of Chicago and that more than 70% of American stock transactions use this trading.

The latest algorithmic trading software also offers decision strategies in that IT can react instantly to the slightest change in price and is, therefore, faster than a human trader.

One of the prerogatives for using this type of trading is to use it on the market with high liquidity and on classic products such as stock market shares, currencies, or interest rate products.

The detailed operation of algorithmic trading:

There are two types of activities in algorithmic trading with assisted stock market operations and automated trading.

The former is, in a way, the basic version of this method since the mathematical models used provide trading suggestions that investors are free to use or not by placing their orders themselves.

Automated trading is rarer and more complex in that it carries out transactions directly 24 hours a day and according to the strategies set. They operate on the principle of truncating large orders into a series of market-assimilable lots to reduce brokerage costs by placing orders directly via a machine.

Of course, this mode of trading is regulated since MiFID 2 has published various rules and definitions that apply to it. Thus and since 2016, companies that transmit at least two orders per second on one instrument and more platforms or four messages on several instruments and one platform are considered high-frequency trading operators.

Who is algorithmic trading for, and what do you need to use it for?

Algorithmic trading is not intended for novices. Indeed, algo trading India algorithms are accessible to programmers who define their work instructions to follow a precise and thoughtful investment strategy. However, they are designed to work on different operating systems.

Transactions carried out by these instruments are, of course, encrypted. The machines thus launch calculations with very high power because they make it possible to cross-check different sources simultaneously, considering the history of the market, volatility, and other elements of this type.

Differences between algorithmic trading and automatic trading

The fundamental principle underlying all technologies is that the human factor (more than the machine factor) always remains the most reliable in the face of multi-variable decisions. For this reason, it is fair to say that automatic trading that people develop is always superior to that produced by programs (algorithmic trading).

So an experienced trader with flexible thinking skills and adapt to market movements is better than algorithms. How then can an inexperienced trader try to make money?

Better to rely on algorithmic trading or automatic trading, or instead that you copy an experienced trader?

Obviously, in light of the facts, copying the trades of experienced traders would be best.

Algorithmic trading: Is this a scam?

In some cases, some unregulated platforms gave the impression that it was indeed a scam. All of them claimed to use artificial intelligence, but algo trading india itself is not a scam. Letting systems programmed to process historical data and news can help us in our investments is not a scam, just as a knife is not necessarily a weapon if used correctly. The important thing is to rely on those who are experts in trading and implement a policy of total transparency.