Demat Account: What is automated trading and what are its benefits? MintGenie explains

livemint.com:

Trading in the stock market can be a complex and effort-intensive process that requires traders to consider numerous factors to achieve profitability. While some traders focus on making high-quality trades over a smaller quantity, others prefer to execute numerous orders quickly to capitalise on market opportunities. The latter approach often involves a technique known as automated trading, which allows for executing stock market orders at high speed and large volumes. This method aims to increase profits by leveraging higher trade volume and swift order execution.

Automated trading, also known as algorithmic trading or mechanical trading systems, involves using specialised software backed by algorithms to execute trades at high speed. It allows investors to execute trades automatically based on predefined criteria such as technical indicators, market data, or other parameters. Investors and traders utilise trading software to input pre-programmed instructions based on specific criteria such as time, volume, and price.

When market conditions match the set instructions, the trading software automatically executes orders according to the investor's settings. Automated trading is commonly used by mutual funds, hedge funds, insurance companies, banks, and other institutional investors to carry out large volumes of trades efficiently, which would be challenging for human traders to manage manually.

The primary goal of automated trading is to increase profit margins by enabling investors and traders to execute hundreds of trades simultaneously, capitalising on market opportunities in real-time.

Efficiency and Speed: Automated trading systems can execute trades quickly and efficiently, often faster than a human trader can. This