Maximum people
have been the victim of fake news and rumours at some point in time. With the
sudden popularity of social media sites, the myths just found a place to
proliferate. No industry could escape the virus of rumours. It is essential to
convert the myths about algorithmic trading and present the reality to the
entire global population.
Myth #1:
High-frequency trading and algo trading are the same.
If you search
over the internet to get information about algo trading, you may develop a
concept that high-frequency and algo trading is all the same. It is because
many websites and posts group them together as the “Algorithms.” But the terms
are mutually exclusive.
• The process of
algorithmic trading is all about the
execution of orders using automated and pre-programmed trading instructions.
The program will consider all the variables influencing the purchase or sell
decision, including volume, price, and time.
• High-Frequency
Trading is a particular type of algorithmic
financial trading process. It exhibits definite features like high speed,
high order-to-trade ratios, and high turnover rates that utilize the electronic
trading tools and the high-frequency financial data.
Now that you can
well understand that the two are totally different concepts, you can realize
how the misconception can hamper decision-making.
Myth #2:
algorithmic trading has technical challenges
If you are not
much good at dealing with technical applications, you may give in to the myth
that the algo trading process is
technically challenging. In fact, millions believe in the misconception as it
is easy to imagine that when a machine is doing such a critical job, you have
to be a pro in technical aspects.
Although the
experts never say that algo trading is non-technical or does not require any
coding, you can be a successful algo trader even
without any knowledge about the complex technical aspect. You don’t have to do
the coding. You just need to know how the algorithmic trading works and how you
can implement the features for better profit booking.
All you need to
do is to ensure the following:
• Select the
right platform from the numerous ones available around
• Preference for
technical assistance
If you are ready
to plunge into the exciting world of algo trading, why not start now?
Myth #3: Algo
trading is not for Individual traders
And again, a big
mistake. Individual traders cannot do High-Frequency Trading, but there is no
such limitation for algo trading.
• People all
across the globe can do algo trading.
• There is no
need for any initial huge capital investment for the infrastructure and
technology, as in the case of HFT.
• A little bit
of coding knowledge and thorough experience of manual trading will aid in the
procedure.
Get rid of
doubts
There are many
other doubts that you may have about algorithmic trading. But discuss and
gather knowledge only from reliable sources and experts who have been in the
profession for a long time.Misconceptions often cloud your thought process
and hinder financial growth by investing depending on the statistical data. The
process has a prosperous future, and it is time to include you in the growth
process.