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Running the Risk: Is Your Portfolio Ready to Try Algorithmic Trading?


Algorithmic trading (algo-trading) uses computers to make data-based decisions on equities trading. Its data resources and speed follow defined instructions (algorithms) to place trades. These trade decisions use detail on timing, volume, and price. And, it does this with a speed and accuracy that average traders could not pull off.

As The Economist explains, “In this type of a system, the need for a human trader's intervention is minimized and thus the decision making is very quick. This enables the system to take advantage of any profit-making opportunities arising in the market much before a human trader can even spot them.”

Is your portfolio ready to try algorithmic trading?

You should consider the pros and cons of algo-trading if you’re thinking of risking your portfolio:

Pros -

  • The speed and efficiency of trade entry facilitate decisions based on data, not opinion or emotion. Algo-trading is rational, neither knee-jerk or indecisive.
  • Algorithmic trading assures integrity and discipline in volatile, confusing, and unpredictable markets.
  • Algo-trading builds its power on your history, but it also lets you alter the math if you feel the results are not going your way.

Cons -

  • Algorithmic trading eliminates the human factor, but the new dependence on technology risks systems failure that keeps you from making profitable trades.
  • How the Market Works warns, “You should also be aware of the risk of over-optimization, which can create streamlined algorithms that look great on paper but fail to translate in real market conditions.”
  • A single problem with the program can lead to sequential problems. If a glitch places orders, the stock price will plummet risking panic in the market.

Running the risk

Making algo-trading work for you requires a quality program and tech advice. Investors need reliable and proven stock market algorithm software

Less tech-savvy individual traders should look for certain features when shopping for their algo-trading software:

  • Backlist lets you simulate a past performance to test if the algorithm configuration is right for you.
  • User-friendly programs are important to average investors. They must need demos and tutorials that make navigation easy.
  • Commissions and costs must be transparent, reasonable, and acceptable.
  • Data is the core of the algo-trading platform, so you should research the data accessible to the software programs.
  • Strategies focus your plans and reduce your risk. The best software packages offer multiple optional strategies. Collective2, for example, presents itself as “a ‘marketplace’ for algorithmic trading strategies.”
  • Web-based platforms make trading easy and convenient, but desktop programs may have more features.
  • Customer service supports the average investor who needs tech advice from time to time. So, when you shop, you must research reviews and customer testimonials.

Are you ready to run the risk and run algorithmic trading?

It’s complex and costly to build algorithmic trading on your own. But, you can trust your portfolio to a tested, tried, and trusted algorithm software program.

 There is some learning curve in operating any program, so when you shop, you need the advice and support of an adviser and research into program options and customer input.


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