Algo-trading on the stock market: this system identifies trends, minimizes risks and executes orders by software. Everything you need to know
Imagine if we say that there is technology that can help you trade better online? What do you think?
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Yes, Algo-trading is the fastest growing technology with amazing and smart features that effectively improve your trading performance and speed.
Algo trading or Algorithmic Trading is a method designed by professional traders and stock brokers to trade in the stock markets in which orders are executed by software with predefined strategies or methods.
Algo trading has provided excellent research, expert additions, and immense support to the trading community, and is now commonly used by more than several traders and investors.
Honestly, Algo-trading is phenomenal because it works like a charm and doesn’t require any human assistance. Studies also show that there is a huge difference between the way a human trader trades and the way Algo-trading works.
So, you must be wondering how to identify trends and strategies in your favor? Are there parameters that decide the strategies?
These strategies are based on volume, price, resistance, support or any other factor that the trader or investor is comfortable with. Usually, the investor will always choose a strategy that seems more confident, according to her. Now the advantage is that because Algo consumes data it becomes easier to identify the current trend. It is otherwise a challenge for an investor to act quickly while analyzing large chunks of data in less time.
Let’s understand this with an example: if you are an investor and you have applied 10 different strategies on stocks, we are talking about a stock here, then the system will suggest variations.
Out of these 10 stocks, if 7 are showing buy signals and 3 are showing sell signals, it becomes obvious that you need to buy the stock. The reason is the same as the majority of strategies show you buy signals, so yes it can be favorable.
This is another advantage of our Algo based trading: you can use multiple strategies at once and decide the net result of the strategy.
Hemant Sood, Managing Director, Findoc Group and angel investor in start-ups
(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making a financial decision.)