Learn with ETMarkets: Step-by-step guide on algo trading for small & medium retail traders

economictimes.indiatimes.com:

traders and investors reading this article would have heard this word a few times in the recent past. It is arguably one of the trending topics for Indian retail traders. There are many definitions of it on the internet as well.

In this article, we will learn in detail what exactly is this algo trading and whether it will be of any benefit to retail traders/investors. Algo trading as the name suggests is the execution of trades via algorithms (Strategies coded on specific languages like Python, C++, AFL, Pine, etc). These algorithms constantly monitor the stocks/indices of your choice and generate and execute orders on your behalf, giving you freedom of time and making you free from sitting in front of screen and monitoring charts.

When we talk about algorithms or words like Python, C++, this directly creates a complicated image and it seems extremely difficult to understand and use, and hence many retail traders don’t even take up the first step to dive into this field. Let’s make things clear and simple: Firstly, algo trading is not rocket science, and yes a non-coder with zero programming knowledge can also operate heavy and complicated algos at his/her fingertips. After all, they are just ready-made commands that need to be deployed using a few clicks.

Many people confuse algo trading with machine learning and artificial intelligence but I want to clarify that both are completely different. In algo trading, as a trader, you give the command (via algo) on how to enter and exit any trade, so it's your logic that is getting automated. Algo trading does not mean algo will automatically decide when and what to buy, that stuff is AI.