What Is Auto Trading And How It Works
Automated trading (also called algorithmic trading, strategy trading) uses a computer program that follows a defined set of instructions (an algorithm) to place a trade. The trade, in theory, can generate profits at a speed and frequency that is impossible for a human trader.
Benefits Of Automated Trading
- Trades are executed at the best possible prices.
- Trade order placement is instant and accurate (there is a high chance of execution at the desired levels).
- Trades are timed correctly and instantly to avoid significant price changes.
- Reduced transaction costs.
- Simultaneous automated checks on multiple market conditions.
- Reduced risk of manual errors when placing trades.
- Algo-trading can be backtested using available historical and real-time data to see if it is a viable trading strategy.
- Reduced the possibility of mistakes by human traders based on emotional and psychological factors.
