The financial world is constantly changing. With the advent of technology, new investment strategies have come up that have revolutionised the world of trading for investors and traders. With many investors and traders switching to automated or algorithmic trading from manual trading, its popularity has soared. Earlier, coding was a necessary skill for algorithmic trading. However, now, no-code algorithmic trading platforms such as uTrade Algos have also come up where pre-made investment strategies are available for traders to click and deploy. 

With so much development in algorithmic trading, one may wonder what the future holds for it. We’ll discuss the same in more detail in this blog. Read on!

Algorithmic Trading: Future of Investment

Algorithmic trading, also known as automated trading, is a method of trading where a computer program executes all the trades based on a pre-determined strategy. Based on technical analysis and market data, the pre-determined strategy is coded into the computer program to make buying or selling decisions on behalf of the investors or traders. 

Initially, algorithmic trading was popular only among institutional investors since they had the time and resources to implement it. However, now, with several no-code algorithmic trading platforms offering their services at competitive prices, it is gaining popularity among individual traders or investors. Considering how platforms like uTrade Algos are coming up with helpful features, the popularity of algo trading will soar in the future as well. 

Let’s discuss in detail the reasons why algorithmic trading is the future of investment.

1. Speed

What a trader would do in a day manually, the algorithm can do in a minute. Swiftness or speed is one of the biggest reasons why investors would be interested in algorithmic trading. It swiftly analyses global markets and makes trading decisions based on the coded strategy. Hence, the investors rarely miss out on any lucrative investment opportunities. 

2. Cost-effective

For every trade executed, the traders and investors have to pay a fee to brokers. However, in algorithmic trading, the algorithm executes the trades. Hence, it is more cost-effective than manual trading. Also, sometimes, minute human errors such as typos might prove costly to traders and investors. However, the algorithm makes decisions in automated trading, and such errors are avoided.  

3. Devoid of emotional bias

Another reason why automated trading is the future of investment strategies is its ability to be devoid of emotional bias. In manual trading, emotions may sometimes play a spoil sport and can cost dearly to investors. However, in algo trading, the algorithm decides what and how much to buy or sell based on technical analysis and facts. Hence, it is free from emotional bias, which humans are prone to. Not just this, algo trading makes investors more disciplined since the algorithm executes trades based on pre-defined rules and criteria. Hence, no reckless decision-making can take place. 

4. Risk management

For investors, managing risk is crucial. For this, several risk management strategies are devised and implemented. However, if a human trader forgets to put in place risk management strategies, it may have a detrimental effect on the investment. In the case of algorithmic trading, risk management strategies such as stop loss orders, position sizing and more are put in place right at the start. This effectively manages the risk associated with investing. 

5. Growth of artificial intelligence

With the onset of artificial intelligence and its exponential growth, the financial industry is also making use of it. AI-based algorithmic trading is slowly gaining popularity across the financial world. Traders are using AI in their algo trading journey to make better investment decisions. This increase in reliance on AI and the fact that it is here to stay adds to the many reasons why algorithmic trading is the future of investing. 

Conclusion