Key Advantages of Algo Trading

Key Advantages of Algo Trading

Capital Markets CIO Outlook | Thursday, April 01, 2021

Trading with algorithms provides the advantage of scanning as well as executing on multiple indicators at a speed that is beyond human’s capability. As trades are analyzed and executed faster, there are more opportunities available at better prices.


Fremont, CA: Algorithmic trading is becoming more popular with time because of the advantages it offers. The advantages of algo trading are related to the accuracy, speed, and reduced costs. Since algorithms are executed automatically, it enables a lot of speed.

Trading with algorithms provides the advantage of scanning as well as executing on multiple indicators at a speed that is beyond human’s capability. As trades are analyzed and executed faster, there are more opportunities available at better prices.

Another significant benefit of algorithmic trading is accuracy. When a computer is executing a trade automatically, one can avoid the pitfalls of accidentally putting in the wrong trade associated with human trades. Manual entries increase the risk of buying the wrong currency pair. With the computer algorithm that has been double-checked, one can make sure that the correct order is entered.

One of the key advantages of algo trading is the capability of removing human emotion from the markets, as trades are restricted within a set of predefined criteria. This is an advantage because humans trading is vulnerable to emotions that result in irrational decisions. On the other hand, algo traders immune to emotions like fear and greed.

Algo trading provides the ability to backtest. It can be difficult for traders to know what parts of their trading system work and what does not work as they cannot run their system on past data. With the help of algo trading, one can run the algorithms on the basis of past data to see if it would have worked in the past. This ability also offers a great advantage since it allows the user to remove any flaws of a trading system before one runs it live.

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