Algorithmic trading can be referred as a method of executing orders with the help of automated pre-programmed trading instructions accounting for variables like price, time and volume. An algorithm is a set of directions to solve a problem. Small portions of the full order are used to send to the marker over time using a computer algorithm. Algorithmic trading use complex formulas to help in making decisions related to buying or selling financial securities on an exchange.
In the modern era, the majority of traders trust algo trading for their hard-earned money. The right piece of computer software can ensure effective and accurate execution of the trade orders, whereas wrong software can lead to huge losses.
What is Algorithmic Trading?
As described earlier, an algorithm is a set of step-by-step instructions to solve a problem. Algo trading is a process in which a computer program is used to follow a set of instructions for placing a trade order. The primary aim of this program is to identify profitable opportunities and place the trade with an objective to generate profits in the best possible manner. Due to several perks and benefits, trading based on algorithmic trading software has gained great popularity.
Benefits of Algorithmic Trading
This type of trading comes with plenty of benefits, including
- Trading can be executed at the best possible prices.
- Order placement is quick and instant.
- It can be done on time and avoid significant price changes.
- It can be helpful in reducing transaction costs.
- It can reduce risks of manual errors when placing trades.
- It can automatically check multiple market conditions.
- It can reduce the possibility of mistakes by human traders prior to emotional and psychological factors.
Users of algorithmic trading software
Algo trading is ruled by large trading firms, including hedge funds, investment banks, proprietary trading firms, and so on. Individually, experienced proprietary traders as well as quants use this trading. Proprietary traders who are less technology-savvy may choose readymade trading software to meet their trading needs. The software can be either offered by brokers or purchased from third-party. On the other hand, quants have in-deep knowledge of both trading and computer programming. Generally, they develop their own software.
Algorithmic trading software: Whether to Buy or Build?
There are two main ways to access this software – build or buy. By purchasing this software from third-party, you can quickly access it and save time. On the other hand, building it allows full flexibility to customize as per your choice and needs. Buying this software can be expensive, but building it requires time, effort, and deep knowledge, and still, it may not be foolproof.
Where to Begin?
If you have decided to buy algorithmic trading software, there is no shortage of options. There are plenty of sources from where you can get it and access it quickly and timely. Initially, this software offers free limited functionality trial versions or limited trial periods with complete functionality. Explore the software before buying them. Do not forget to check out the available documentation in detail.
Algorithmic trading software can be expensive to buy, but tricky to build. Buying this software offers you easy and quick access while building it allows you to customize as per your choice. Keep in mind that failure in building may result in big losses.
Today, there are a number of sources from where algo trading software can be purchased. The best thing is that you can schedule a demo before placing a final order. Take the help of the internet and find the right online platform to get this software for your needs and requirements.