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Creating An Edge With Algorithmic Trading

Anyone using trading platforms to trade knows that they can be incredibly useful trading tools

. Online trading has a very decisive advantage over phone trading. SPEED. In an electronic trading environment, speed is mandatory. With todays technology, you can manually place orders online or write them in computer programming codes so order placement is automatically placed based on your trading criteria. If you choose to manually place orders online, youll certainly need to come to grips with adhering to trading discipline as you may be susceptible to making irrational and impulsive decisions. Trading platforms have come a long way because they now have the ability to handle extremely sophisticated trading orders, manually or automatically. Traders have advanced functionality giving them much better control over dozens of trading order strategies. Clearly not all trading platforms are created equal. With that said, it doesnt guarantee a more expensive trading platform would be the best trading platform to use. It is wise to demo and get accustomed to a trading platforms environment that best suits your trading style. A trading platform with optional features that can handle complex algorithmic strategies can be an important development in the automation process.

There are many terms applied to algorithmic trading. Some of the other terms commonly used are algo trading, automated trading, black-box trading, systematic trading, or robo trading. Basically algorithmic trading is the use of computer programs for entering trading orders with the computer algorithm deciding on aspects of the order such as the timing, price, or quantity of order, or in many cases initiating the order without human intervention. The algorithms that can be created can be simple to extremely complex which can take a great deal of the stress and emotion out, especially in high-frequency trading. This type of trading is one of the latest advancements in the financial industry, and has become very popular very quickly, as more and more traders realize that they can rapidly increase their efficiency by using algorithms as part of their trading model. Algorithmic trading is widely used by pension funds, mutual funds, commodity trading advisors, hedge funds, prop groups, and institutional trading managers.

When choosing a trading platform, important factors to consider are reliability and functionality. Trading platforms have now advanced to such a point where they have been real-time battle-tested by millions of traders worldwide. Platform vendors understand the intrinsic need to have a stable platform that can automate strategy execution and can seamlessly handle a live environment. Having more functionality means more options such as programming language compatibility, the ability to trade different asset classes, data integration, real-time simulated system testing, etc. Algorithmic trading can certainly reduce ones emotion and widespread trader anxiety.

Its also very important that a trading platform be intuitive. This means that it has to be user friendly enough for you to navigate it quickly and efficiently, but also complex enough to provide all of the features you will need to be successful. Being able to custom tailor your trading platform to your own personal preference, and being able to run simultaneous trading strategies should be a standard feature in a trading platform. An institutional trading platform will cost more money, however it can definitely provide you with a much more robust solution. Youll be able to access and view pertinent information, without feeling overwhelmed by the data or concerned that you are missing out on a trading opportunity. Choosing a trading platform that youre comfortable with in term of usability, as well as providing you a fully comprehensive feature set is an imperative.

As weve mentioned speed is of course vital to algorithmic trading. One last very important piece is meeting the trading platforms minimum hardware and software requirements. The fast processing time of the trading platform will ensure that all automated signals are executed quickly and reliably. This fast processing time is especially important when viewing and analyzing risk management data while the computer calculates or defines your specific risk parameters.

It is not an overstatement to say that the entire financial industry has embraced algorithmic trading as the next generation trading tool. Principally due to the reduction of overall transaction costs, both in terms of market impact for any given level of execution as well as trading expenses. Employing algorithmic trading strategies can result in significant benefits in both efficiency and profitability.

The risk of trading futures, options and foreign exchange can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. For more information please Visit :

by: BeverlyHills Capital
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