Algorithmic trading and automated trading platforms have seen dramatically increased use over the past few decades, revolutionizing the stock market by increasing both the speed and efficiency with which trades occur. These forms of trading can provide an immense advantage to investors, as they enable them to access various markets around the globe, execute orders with greater speed and accuracy, and achieve higher levels of liquidity when engaging in transactions. Automated trading platforms use particular algorithms to decide when to buy and sell assets; this, in turn, allows novice traders to take advantage of the market without having to be experts in the intricacies of stock trading and financial instruments. In this article, we will discuss the fundamentals of algorithmic trading and automated trading platforms, along with the benefits they can bring to novice traders.
Algorithmic trading, also known as algo-trading, is the use of computer programs to identify trading patterns and execute trades according to predetermined instructions. By using advanced algorithms, traders can identify large-scale trends as well as micro-level trends and intra-day price changes. Algorithmic trading not only allows for faster execution times for traders but also for the higher accuracy of trades due to the minimization of human error. Furthermore, algorithmic trading can provide a more consistent approach to trading and can provide more precise trailing stops and position size management strategies, as well as disseminate shorter term strategies with greater accuracy.
Automated trading platforms, on the other hand, are computer systems that allow for direct access trading — i.e., trades can be executed directly from the platform with minimal intervention from the trader. Automated trading has its advantages in that it allows for a more streamlined approach to trading and takes the emotions out of the trading equation. Additionally, automated trading can provide better order execution, minimal latency and fewer trading errors due to the elimination of potential human error.
Novice traders will find algorithmic trading and automated trading systems to be extremely beneficial in their trading endeavors particularly when just starting out. By taking advantage of algorithmic trading, novice traders can begin developing their own algorithms and strategies, as well as take advantage of existing algo-trading strategies, such as trend trading, scalping, and momentum trading. Automated trading systems, meanwhile, can provide novice traders a set of procedures and guidelines to follow when engaging in trading activities. This can be extremely helpful for those just starting out, as the automated trading platform will execute trades according to the trader’s pre-defined strategy, eliminating the need for constant monitoring.
In conclusion, algorithmic trading and automated trading platforms can be extremely beneficial for novice traders. By taking advantage of these two forms of trading, novice traders can take advantage of pre-defined trading strategies, receive real-time trading data, and execute orders with greater accuracy and speed. Ultimately, algorithmic trading and automated trading can provide novice traders with an invaluable advantage in the stock market.