Importance of Algorithm Trading Today, Algorithmic trading has become a most popular subject matter in the trading world. Some consider it as evil and try to make it responsible for all the peculiarities appearing on the markets and others try to understand it in order to make profits. At the present time; it's hard to live without a PC & an Internet connection. Thanks to the new prospects opened by the IT development. Trading which used to be an activity reserved to some privileged has now become accessible to everyone. But the IT development has not only facilitated the access to the trading, it also opens a new path of trading to the independent Investor & Independent Trader in a way which was before only reserved to Banks and "Hedge Funds"

1. Psychological weakness

Automated trading or Algorithmic trading is able to solve one of the biggest trader’s dilemma i.e. psychological weaknesses. An Algorithmic trading software will respect without fears the rules of your trading strategies. So, there is no Stop loss or any impulsively open position. It can’t think like human being. Algorithmic Software only works on commands given by the user. It works without taking rest. E.g. if one person is doing trading on his own in Equity or Derivatives market and taking position in Index Future. As he is working since long in Stock market he knows that at some particular point Index move upside or downside and but somehow Index not breaches that particular level at which heputs his stop loss order. 2-3 times his Stop loss order trigger and he’s making loss so, next time he is not putting any stop loss order or maybe he is not doing any trade and he may miss the chance of profitable trade or if he’s doing trade and not putting stop loss order and this time Index future breaches that particular level and giving movement of 80-90 points than he is making lossthat isnot bearable by that person. Over here if he is using Algorithmic Trading System he doesn’t have to think of that particular level. As he has already given commands to

that system and that system is working as per commands given by the user. So, at that level he again make a loss but in a limited amount as he has already given stop loss instruction to that software or his trade may be in profit.

2. When to trade

Sometimes we think of some strategy but that strategy only work out in our favor when all the orders are converted into trades as per our calculations or the price we define. In reality if any person trying to trade in 3-4 instruments simultaneously then it becomes almost impossible to converts all orders into trades as per calculations or the price we define. Here market movements and price changes according to markets are very fast. So, if we have algorithmic trading system then we can trade in 3-4 instruments or more simultaneously. E.g. if we think of some strategy in which 2-3 legs are there and the difference or that whole strategy is ` 20 receivable or whatever the amount, when we manually are going to trade for that strategy then it might be possible that the difference of that ` 20 receivable turns into ` 10 receivable or may be ` 10 payable or more. But if we use algorithmic trading system then it’s very sure that our all trades are executed as per predefine trading rules in our Algorithmic trading system. So, here in Algorithmic trading System we can run any complex strategy which we think not to execute manually or it’s impossible to run manually.

Sometimes we think that we can get some good price difference in some scrip if we trade in two different exchanges but we have to sit against the terminal all the time and wait for that particular price differencebut in Algorithmic trading system we can define strategy in which we can put the difference we want and start the strategy then our system start searching for the difference we enter. As the system gets the difference we enter in our strategy, it will convert those orders into trades.

3. Disciplined trading

Emotional factors, such as the desire to earn more profits or a fear of suffering losses, often prevent traders from following a disciplined strategy. Algorithmic trading system nullifies the emotional element of the trading decision, eliminating impulsive decisions based on losses suffered or benefits earned. Trading takes place automatically based on predefined rules, so you maintain discipline even in a highly volatile market. Human traders might make hasty decisions based on the results of stock market trends, or they might bend the rules under pressure. However, algorithmic trading system ensures that the trading plan is executed as defined

4. Achieving high levels of consistency in performance.

The trading plan holds immenseimportance for the trader wherein the plan needs to be executed in a real market scenario. However, it is not guaranteed that every strategy is favorable. If a trader fails in his strategy constantly, then he might not consider making another trade. By not taking a chance, the trader has eliminated all possibilities of trading successfully. Algorithmic Trading Systems allow traders to achieve consistency by trading the strategy. E.g. if someone is reading charts and he enters his orders on that basis, but if he incurs losses due to unfavorable calls then he might stop toexecute next trade that may be in his favor. But if he puts his strategy in Algorithmic trading system then there are less chances of missing that favorable trade. Thus, system can work on continuous basis.

5. Enhanced speed of providing order entries

Since, computers respond immediately with changing market condition, Algorithmic trading systems are able to generate orders as soon as the order criteria are met. In a normal trading situation, getting in or out of a trade a few seconds earlier or delay can bring a big difference in the

result. Using algorithmic trading systems helps to grab every beneficial opportunity with enhanced data entry speed. System run the protective stop loss and target as soon as trade is done. Market moves very quickly and it is possible that we reach to target or its stop loss price immediately after the trade is done. So, when person trade manually, it’s difficult to monitor the stop loss or target.

Hence, Algorithmic Trading Platform provides us the Speed, Accuracy, Volume, Continuation, Disciplined Trading without Emotions.