The Future of Algorithmic Trading

Algorithm – before used as an academic word in maths and science, now more common in  everyday vocabulary due to today’s quickly evolving technology driven society. There has been extensive advancement in technology in the past few years. The development of robots and artificial intelligence is beginning to take charge. Technology that was once seen as a far idea is now in existence. Technology has advanced so much that we have already seen the first self driving car on the road, meaning that drivers will be passengers in their own car.

In the recent years, algorithmic trading has gained popularity and become one of the most popular technologies discussed in the markets. Algorithmic trading has enabled firms the ability to evolve quickly in the markets by simply removing human error and developing the way that the financial markets are today. However, retail traders tend to stay away from algorithmic trading as they see it as complex and out of reach. Although in reality, an automated software does not have the capabilities yet to produce the same results on a volatile market as it does in the forex market. The technical and fundamental analysis the software would have to do before opening and closing each trade would just be too much and moments would be lost considering the speed that the prices in these markets change at.

The leading automated forex trading systems are computer programs which are constructed to analyse market activity and currency price charts. The software aids in recognising key trading signals and finding money making currency pairs before placing trades.

Any good system has its pros and cons, but with algorithmic softwares, there seems to be many more pro’s than cons.

-One of the main pros of robotic trading is speed. The program is able to monitor one to several trading tools and make pre-coded conclusions before carrying out multiple trading operations, whereas traders are unable to carry out more than 1 transaction at a time.

-Another pro is its accuracy. This is a major advantage over humans. An automated trading system has the ability to perform trading operation with no human error getting in the way.

-A third is the period of performance. A program is capable of operating twenty-four-hours a day, therefore making it almost impossible for the system to miss an opportunity the markets may offer even at the craziest hours of the night.

-Furthermore, the modernisation. Most algorithmic trading softwares are self-learning systems and have shown incredible improvement throughout the years. The machines are designed to detect problems within themselves too and have them fixed before any issue is to occur, as well as learning from less successful times in the markets, picking up on the pattern, and performing better the next time over.

However, there are several cons regarding robotic trading such as the anxiety of not knowing what is happening in your account and how the software works. Usually, the softwares work in an unfamiliar way, carrying out trades that are more difficult to understand and this worries the investors. The main ‘disadvantage’ as some may call it, is simply that automated trading cannot produce the same returns as a manual trader can. Softwares are built on low risk and stable returns and therefore run on the motto ‘prefer to be safe than sorry’, and work on upholding their percentage returns and improving slowly and in a stable way.

The future looks bright, algorithms are here to stay and are globalising across the european markets. Algorithmic trading removes the human emotions which are always involved in trading, a flaw which the software has cured and will now increase growth. New algorithms are continuously flooding the market, leading the way to the future of finance.

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