In recent years, there has been an avalanche of emerging technologies across nearly every sector. From blockchain to the Internet of Things, and from healthcare to finance, technology is evolving at a rapid pace and is becoming more and more ubiquitous in our everyday lives. While many sectors and industries are being affected, few industries have seen the potential to revolutionize our lives as has the financial sector. From digital banking to digital currencies, the financial sector is set to be overhauled by a new emerging technology: automated trading.
Algorithmic trading refers to the use of algorithmic trading bots, or algo bots, which uses computer algorithms to buy and sell financial assets such as stocks, currencies and commodities. More recently, algo bots are being developed to operate on cryptocurrency exchanges.
Algorithmic trading has gained momentum in recent years, and this innovative technology is being developed every day. The rise of algo bots has been in part due to advances in computer technology, which have made it possible to analyze tremendous amounts of data and execute operations based on that data at high speeds and while using lower computing power.
This has resulted in fast, efficient, and user friendly technology that can be utilized to potentially increase an investor’s profits. While algorithmic trading systems have not yet eliminated the need for human traders — as humans are still required for oversight over these bots — they have reduced the need for human traders to be present at all times operating on the market.
One of the primary advantages of algorithmic trading programs is the ability to make decisions based on objective data and thorough technical analysis techniques. Many investors don’t have a foundational understanding of a broad range of technical analysis techniques, including risk management techniques. Algo bots can be programmed with vast amounts of strategies that the wealthiest and most successful traders use regularly. This helps to potentially reduce losses.
Another advantage is algo bots can operate 24/7. While most markets aren’t open 24/7, crypto exchanges are, and forex is open 24/5. This functionality allows for human traders to pursue other productive activities while their algo bots are trading on their behalf.
Markets can oftentimes be incredibly fast moving, and having an algo bot that can keep up with rapid market fluctuations can be a wonderful tool.
Algorithmic trading systems can also reduce costs by reducing the need for professional human traders, who require salaries and other benefits. While human oversight is still required to reduce the possibility of losses by the algo bots, they typically require minimal upkeep and can operate with breaks or vacations.
Although algo bots seem like an amazing tool for getting rich quickly, they are not risk free. Algo bots are capable of making trades at a loss, which is why oversight is recommended.
Furthermore, as algo bots become developed for crypto markets, this highly volatile market may still remain exactly that — volatile.
The future of algorithmic trading systems looks promising, and every day the technology behind these bots becomes more and more curated toward success. Algo bots hold the potential to reduce overall costs, improve efficiency, and provide access to sophisticated technical analyses and trading strategies.
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