Advantages of algo trading over manual trading

1. Advantages of algo trading over manual trading In the world of intraday trading, Algo trading strategies are fast replacing the manual trading strategies amd are becoming popular day by because of a plethora of advantages that they bring to the table. Algo trading strategies have existed in the market for more than three years now, but there is still a large number of traders and investors who are unaware about its advantages over manual trading. Let’s take a look at some of those advantages that are revolutionizing the world of automated trading. The tendency to get fatigued Humans have a tendency to get fatigued, especially if they have to do a repetitive task. Because of this, no human, regardless of how great he is at his job, can ever deliver his 100% consistently. This is where computer programs emerge as a viable solution. Since programs aren’t capable of feeling fatigued and cannot get bored or disinterested, they can process more information in the same amount of time. This means more trading and more trading means more potential to reap benefits, which is the goal of every trader/ investor. Humans can be emotionally biased Humans are social animals and they have a tendency to be emotional as well – something absent in computers. While being emotional empathetic can serve you well in social scenarios, in analytical fields like broking, where you’re supposed to think rationally, it can be counterproductive. Computers are better in this regard because they can form algo trading strategies and stick to them in order to get the best results. Computers are more accurate than humans No sane person would ever compare the accuracy of a person and a computer when it comes to executing a given set of protocols. Since we’re rational beings, we have an inherent urge to rebel and challenge the rules – while it works well in social spaces; it is harmful in stock trading. Since computers are more accurate in terms of analysing data and drawing inferences from it, it defies all logic to still prefer manual trading – especially when a ton of money is at stake. Computers programs don’t ask for salaries The best thing about computer programs is that they never ask for salaries. A computer can work for longer durations than a human and still cost substantially less. This saves a lot of money that would otherwise have been spent on employing human resources. As they say, ‘a penny saved is a penny earned’, you can invest this money you have saved to further advance towards loftier business goals. Computers can backtest Unlike humans, computers can keep a precise record of every action they make and can analyse that data to test the effectiveness of previously employed algo trading strategies. If they worked, then those strategies can be used again; if not, then relevant changes can be made in the existing strategy. While algo trading isn’t completely without risk, it still is a better option than manual trading and given the pace at which the advancements are happening in technology, it’ll only get better with time.