How do Algorithmic Trading Platforms Work?
Algorithmic trading has become a buzz-worthy topic in the world of investing. But what is it exactly, and how do algorithmic trading platforms work?
Algorithmic trading (also called “algo-trading”) is a type of computerized trading that uses a little bit of math and science wizardry to help you find the strongest trades. Some programs will even fully execute trades on your behalf.
The idea is that by making calculated trades that take human emotion out of the equation, the overall results will be better. That’s one of our biggest goals at fractalerts, since we know that emotions can be a trader’s worst enemy!
Here, we’ll take a deep dive into algorithmic trading, including what it is, why people love it, and how it works.
What is Algorithmic Trading?
As the name promises, algorithmic trading relies on algorithms. Um, what are those?
If you Google the definition of algorithm, you’ll find something like this: “a process or set of rules to be followed in calculations or other problem-solving operations, especially by a computer.”
How does that apply to the trading-sphere?
In essence, it means setting up a process that filters through various criteria set by a computer program to find what will hopefully be profitable trades.
How Algorithmic Trading Platforms Work
There are thousands of stocks to choose from. Algorithmic trading helps you filter down the choices in a systematic way.
The idea is that computers have the ability to sift through a lot more data than you as a mere human … More effectively, too. The algorithm can detect patterns that might not be evident to the human eye.
You may already be familiar with stock screeners, or programs that help you filter down potential stocks to trade based on criteria you set.
Algorithmic trading can take it a few steps further — depending on the program, it could identify potential trades, or some platforms even execute the trades for you.
fractalerts is an example of an algorithmic trading program. However, it’s not a platform that executes trades for you.
The proprietary fractalerts algorithm sifts through mountains of data to find patterns and identify strong potential trades.
Unlike other programs, fractalerts represent actual trades that the fractal team intends to make. We determine specific entry and exit points, and alert subscribers 12-24 hours before the trade.
This means that as a subscriber, you get the benefit of having the algorithm do the heavy lifting for you, but you also have the time and freedom to make your own choice about how to handle the trade. You can do your own research and make the decision for yourself about your position size, entry and exit points, and so on.
It’s the perfect balance of quality information and freedom to choose what to do with it!
fractalerts offers alerts within a variety of different sectors / styles of trading, including commodities, forex, and more. Check out this post to learn about all of the different alerts we offer!
What are the Benefits of Algorithmic Trading?
Why do people love algorithmic trading? Here are some reasons:
More Free Time
Not everyone has the time (or desire) to be sitting in front of a computer monitor all day to find the most promising trades or watch every tick of a stock. Algorithmic trading does a ton of the annoying research for you, giving you more free time to enjoy life.
Effectively Identify Patterns
Even if you’re a really, really smart person, it’s a simple fact: you can’t sift through as much data as a computer. Nor will you be able to do it as quickly or as efficiently. Algorithmic trading puts tech to use by helping you find patterns that you probably wouldn’t be able to identify on your own.
Algorithms don’t have emotions. Humans do. Honestly, this is one of the biggest advantages of algorithmic trading! These picks will never be based on hunches or gut feelings.
Computers have better and more precise timing than humans. One of the hardest parts about trading is timing an entry and exit. With fractalerts, you’ll get access not only to the stock details, but timed entry and exit points. This can help you make the most of every trade!
As a trader, you probably know that you should have a trading plan and stick to it. But do you always actually do that? It’s extremely hard to be accountable in that way, especially when you’re trading by yourself.
Algorithmic trading helps you determine a strong trading plan. When it’s listed there for you in an alert, you’re far more likely to stick with the plan since it’s already mapped out for you.
Is Algorithmic Trading for You?
Only you can make the final decision about whether or not algorithmic trading is right for you. However, considering the many benefits it has to offer, many traders — both individual and institutional — choose to embrace algorithmic trading as a way to give themselves an edge and identify stronger trading opportunities.
Are you ready to check out the style of trading that some of the biggest fund managers and banks have embraced for years? If so, fractalerts may be right for you.
fractal: Algorithms at Work
It’s an extremely exciting time to be a trader or investor. Technology has evolved so that identifying promising trades is easier and more convenient than ever.
At fractalerts, we provide customers with targeted trade picks based on our findings using a proprietary algorithmic system. Our alerts are based on data — not hype, trends, or gut feelings. Explore the system that fund managers and global banks have been putting to use for more than a decade!