Benefits Of Algorithmic Trading In The Indian Stock Market
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Online trading has made algorithm trading popular and it is in demand. There are instances when the human trader is not able to handle the speed of trading; this is when an intelligent algorithm is required.
An algorithm is a set of clearly defined instructions that can carry out a specific task. Algorithm trading is also called computer-directed trading. The best share market app use algorithms to analyse every quote and trade in the stock market, identify liquidity opportunities and turn them into good trading decisions.
Algorithm trading helps to cut down the transaction cost and lets the investment managers take over their own trading process. In algorithm trading, computer programs are used to follow a defined set of instructions to place a trade at speeds and frequency impossible for human traders.
For algorithmic trading, you need to first identify opportunities for profitable trading. Algorithm trading strategies follow rules that are based on price, timing, quantity or any other mathematical model. Algorithm trading helps to make the markets more liquid and the trading more systematic by ruling out human emotions that can affect trading activities.
Benefits of algorithm trading
The following are the benefits of algorithm trading:
● It allows instant and accurate trade order placement.
● Trades can be executed at the bttert prices.
● As the trades are timed correctly and instantly significant price changes can be avoided.
● As human traders are not involved it leads to reduced transaction costs.
● While placing the trades there is a reduced risk of manual errors.
● Automated checks can be done simultaneously under multiple market conditions.
● Reduced chances of mistakes by human traders because of emotional reasons.
● The greatest option in algorithm trading is High-Frequency Trading (HFT). This method tries to capitalise by placing a large number of orders at a fast speed across multiple markets and based on multiple factors using previously programmed instructions.