There are several different types of trading software available to download or purchase. They often have different features and capabilities that make them more suited to one type of trader than another. One of these is algorithmic trading software (ALTS). An algorithm is a set of specific and clearly defined instructions that are created to carry out a task or process.
So when applied to trading software, it creates the rules that are to be followed. Successful algorithmic trading often depends on software following these rules, and once it is broken down it is not as complex as it may seem. Here is an information breakdown so you can see how algorithmic trading software actually works.
What Is It?
Algorithmic trading is the process of using computers that are specifically programmed to follow a specially designed set of instructions for placing a trade in order to generate sales and profits at a speed that is impossible for humans to achieve. The rules this system must follow are based on aspects such as time, price, and quantity. Trading not only becomes very quick, but also systematic as any potential emotional impact is completely ruled out.
The program itself is relatively straight forward to write. Once this is done, the program will monitor the stocks automatically as well as placing orders for buying and selling when the terms of the programed rules are met. Thanks to this, the entire system is automatic and does not require you, the trader, to sit and watch. Instead, it is often able to alert you via push notification, text message, or even email. It’s accurate, smart, programmable, and surprisingly user friendly.
Whether you are partaking in regular trading or algorithmic option trading, there are a number of clear and excellent advantages to the system. The first, and perhaps most obvious, is that trades are always executed at the best possible prices. This means you could benefit massively later when it comes to selling.
There is also the benefit of instant and accurate trade order placement. No room for human error is left here, and the chances of execution at a level you desire are vastly increased. The risk of human error is also reduced when placing the trade. With this option, you know the software is usually going to get it right. Plus, you can benefit from reduced transaction costs.
There are also checks being made across marketplaces simultaneously and constantly, at speeds a human could never keep up with. It takes less than seconds to discover the best new trade deals and execute them. Plus, you have the opportunity to backtest the algorithm as well, so you can make sure it is working for you at the best possible level. Finally, a lack of human emotion becoming involved in the process means that decisions can be made faster and with more accuracy.
Where Is It Used?
In the current market, the most successful trading comes from high frequency trading (HFT). This process attempts to capitalise on placing a large number of orders at high speeds across multiple marketplaces – as per the instructions given, of course. It is also used by mid-long term investors who purchase stocks in large quantities but do not wish to effect the market.
They are also used by shot term traders who benefit from automated trade execution and created sufficient liquidity in the market for sellers. Systematic traders simply program their technology and then sit back, watching it carry out all the necessary work at fast speeds and completely automatically.
When you go to buy the software, always check the algorithmic trading reviews before you purchase, download, or commit to anything. It is important to ensure a company is legitimate before you give them your money, and a good one will understand that if you ask to call them back.
Always read the reviews and keep a close eye out for deals that are too good to be true – they are.
Algorithmic trading is actually a very basic process once you break it down and examine it a little closer. It can bring in excellent fortune and profits, and the fact that it is able to run by itself is ideal for those with busy lives, or people who would rather spend their day doing anything other than watching their screen. It’s simple to find, install, and manage, so if you are looking for a new hobby then this might be just the one for you. Most companies have free trial periods (or are completely free of charge), so it is worth taking a look.
Yes, you can pick up a lot from the features and learning tools that come with your trading software, but there's nothing quite like being mentored by a trader whose had experience and success. Jason Bond has made his fortune from trading and now offers to teach you what he knows. Visit his site for details.