Algorithmic trading vs traditional trading: Which path is right for you?
algorithmic trading is taking over the market by leaps and bounds owing to several benefits. In this piece, we delve into the comparison between these two types of trading and will figure out which is the best method for investors. In traditional trading, the participants follow a manual approach to trading stocks, options, currencies, and more.
The traders make buying and selling decisions based on their own analysis, economic indicators, and other market factors. This method completely relies on human judgement, intuition, and emotional intelligence while making a trading decision. On the other hand, algorithmic trading involves the use of complex algorithms and computer programmes to automate the trading process.
It requires no human intervention after a certain period, as the algorithms can be designed to execute decisions based on historical data, predefined rules, and market indicators. On the basis of this difference, a comparison can be made in terms of three characteristics: speed, flexibility, and risk management. Undeniably, algo trading has much faster execution and accuracy than traditional trading.
The algorithms automate the entire process of automating the quantitative analysis of a stock, then placing an order against it and capitalising on multiple market opportunities. This enables a trader to execute hundreds of trade orders at a time, which is not possible in traditional trading. Algo trading allows for customization of a strategy at the beginning of a session and then functions in a certain way that allows for the capture of trading opportunities in a specific manner.
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