Algorithmic trading has gained popularity in the recent past due to numerous advantages associated with it i.e. on accuracy, speed and reduced cost. Investment need to be of reduced cost so as to help maximize gains which is to the advantage of investor. Algorithmic trading helps an investor to realize this hence it’s a better method of trading. Algo trading has numerous advantages as explained below.
Speed is essential in business and in algo trading, algorithms written beforehand are executed automatically. This enhances the speed i.e. normally measured in fractions of seconds.
Checking and Performing Multiple Indicators
In algo trading speed of scanning is so enhanced that even human get it hard to understand. This also help sort scanned items on multiple indicators enhancing speed. This assist in availing better prices since trades are checked and sorted faster hence more gains.
The key factor in trading is the accuracy as it enhances accountability and helps avoid confusion that may arise in the process of trading. Executing transaction automatically helps avoid putting unwanted trade on human trade. Computer automated algorithms are normally looked into keenly to ensure appropriate order is entered.
Takes away Human Affections from Trade.
Since trades are constrained within a set of predefined criteria, removing humans’ emotions from the market is achieved. This comes from the argument that human business is suffering from affections that can lead unhealthy decisions which are harmful to the business. For example, being afraid as well as gluttony are the main emotions that affect the business but algo traders are not vulnerable to this therefore an advantage.
Power to Back Test.
In order to be sure whether a trading system can work, it is necessary to conduct a back test on the past data. Algo trading has this ability hence help users remove flaws in the system early enough before it harms the business. This help users avoid harmful risks that could lead to huge loses.
Decreased Operation Price.
The objective of any form of business is to make profit and thus having reduced transaction cost, this aim is realized. Algo traders don’t have to devote much time observing the market as this can be done without unremitting supervision. The reduced time of trading greatly lowers transaction cost due to saved opportunity cost of constantly monitoring the market. This help the users reduce expenditure which help maximized on profits. This is enough to tell you the algo traders are highly placed in making huge profits in the current technological world as they operate fast and serves many clients within a specific time.