Advantages of Algorithmic Trading

Algorithmic trading is gaining popularity because it offers many advantages over manual trading. Algo trading offers speed, accuracy and lower costs.

The main advantage of algorithms is their speed. They are programmed beforehand and executed automatically. These trades can be completed in fractions of seconds, which is faster than what humans can see.

Trading with algorithms offers the benefit of scanning multiple indicators and then executing at a rate that is faster than any human. Trades can be executed and analyzed faster which means more opportunities at lower prices.

Algorithmic trading also offers accuracy. A computer executes a trade automatically, so you can avoid the potential pitfalls associated with human trades. Manual entries are more likely to purchase the wrong currency pair or the wrong amount than computer algorithms that have been double-checked to ensure the correct order.

Algo trading has the advantage of removing human emotion from markets. Trades are limited within predefined parameters. This is advantageous because humans trading can be affected by emotions that can lead to irrational decision making. Fear and greed are two of the emotions that can lead to poor decisions, but algo traders are not susceptible to them.

Algo trading also offers the possibility to backtest. Trader's can struggle to understand what parts of their trading system are working and which ones don't, since they cannot run the system using past data. Algo trading allows you to run algorithms on past data and see if they would work in the future. This is a great advantage because it allows you to remove flaws from a trading system before it is live.

Automated trading also has the advantage of lower transaction costs. Algo trading allows traders to trade without constant supervision, so they don't need to spend as much time monitoring markets. Because of the reduced opportunity cost of monitoring the markets, trading takes less time and results in lower transaction