Automated Trading: How to use technology to trade smarter, not harder
electronic trading systems has altered trading in financial markets. Technology now enables trading to be more effective, and there is less reliance on manual intervention. The trading systems have become more sophisticated, and with algos potentially operating 24x7, traders can open up to new possibilities, scale and implement complex strategies without any physical presence.
Rise of Automated Trading
The concept of an automated trading system was introduced in 1949 by Richard Donchian who formulated a set of rules to purchase or dispose of funds – autonomously executed trades were based on the completion of specific conditions in the market. However, algo trading became more known in the 1970s when the New York Stock Exchange incorporated the Designated Order Turnaround (DOT) system, which provided a facility for electronically sending orders to the trading floor – the first step towards the use of computers in trading. It was only with the advent of the Internet in the 1990s, though, that it took off.
In the last few years, thanks to the development of technologies, algorithms and access to big data, automated trading is estimated to generate a considerable share of all financial market activity. One of the major advantages of automated trading is that it allows a trader to implement pre-programmed instructions, based on factors like timing, price, and quantity, for trading. And the risk management is also disciplined in automated trading, unlike in manual trading where traders do get emotional with their
