Pros and Cons of Algorithmic Trading


Today, algorithms dominate some aspects of our lives, such as traffic light control, social media feeding, train applications, or else. Over 60% of the trade is a trade-in algorithm. The calculations are also in the process of redesigning traditional stock trading. In the last decade, the popularity of algorithm trading has increased significantly. However, some people would have a question, such as is algorithmic trading profitable for them?


The market of security using some specific rules derived from historical information. This innovative form of trading allows an IT platform to adhere to a particular set of principles. This set of instructions contains specific criteria for variables such as the time of trading, the size and quantity of the sequence, the price, etc. After analyzing the variables, the computer program finally executes a trade on its own. It uses complex mathematical and statistical formulas to create alternatives. It prevents emotional exhaustion.

Pros of Algorithmic Trading

There are many benefits to this kind of trading. High-profile resellers mainly use it. It is advantageous and beneficial for large orders. It is a compact process and works for many functions, such as acquiring liquidity or reducing marketing costs.

The benefits include the fastest application of the purchase process, more available trade, quick and efficient booking of profits from slight price fluctuations, fewer errors, and business costs reduction. Algorithmic trading also helps to increase the diversification in significant capability. Therefore, this trading type improves the quality of the market and also makes it more comprehensive.

Cons of Algorithmic Trading

Although algorithmic trading is precious and has several advantages, this does not mean that it has no disadvantages. Like other sources of income and trading approaches, it also has a dark side and some disadvantages. Because of too much reliance on technicians, it affects the dealer management to become inadequate.

After that, continuous monitoring will take some time for you. Regarding that, you need to understand the programming process very well. Other disadvantages of this algorithmic trading are the possibility of over-optimization, requires high-quality instruments, and lack of consensus on many regulations. Moreover, sometimes, you can lose direction in extreme adjustments and dull market conditions. Therefore, the actual life expectancy fluctuates at some period.

To sum up, everything in this world always has white and black. It also applies to algorithmic trading. Besides the advantages, there are some disadvantages. So if you want to follow it continuously, you should never neglect an excellent view. Like all other trading strategies, it also has some drawbacks, but the hard work in algorithmic trading ensures enormous benefits.