When it first came into the scene, Algorithmic trading was mostly used for stock market purposes. But it slowly made its way to retail trading as well. Many eCommerce companies have now resorted to Algo trading in light of it being reliable, fast, effective, and increasing government regulations.
The global algorithmic trading market is expected to grow from $11.1 billion to $18.8 billion from 2019 to 2024. As many retail traders are looking into Algo trading, there is also an increase in platforms like Quant Terminal, which offers various products and resources to empower professional quants.
Before you get into how retail traders can benefit from Algo trading, let’s start with the basics. So what is Algorithmic Trading?
Defining Algorithmic Trading
Algo trading, also known as an automated trading system, is a platform where every trade is executed using the software. It uses algorithms as predefined instructions to place orders and generate trading signals.
These existing instructions have a backtested algorithm strategy. Backtesting and optimization takes into account trade inquiries, futures, and forex. Every algorithm may have access to historical and real-time prices of instruments.
It performs computations based on the prices after which you can buy or sell an instrument. So when it comes to retail traders, they have multiple opportunities to benefit from. It includes accuracy, fast-trade execution, and more.
Let’s see how algorithmic trading helps retail traders:
Fast Trade Execution
Speed is an essential factor when it comes to retail traders. If you want to make the strategy profitable for you, you should have the means to increase the speed of execution. Usually, in trading, you can break even or come out with profit only when you compensate wins for your losses.
You must be vigilant with the balance; if the scale tips on the losing side, you may face irreversible repercussions. With the amount and number of wins, you should account for your costs and efforts. Algo trading presents the right opportunity for this.
The Benefit Of Technology
One significant advantage for retail traders with Algo trading is the choice of technology for trading. You have the freedom to choose the right tools for the trade without any concerns about the legacy systems integration.
QuantTerminal and other integrated platforms provide scripting with languages like Python or C#. You can use these languages that come with packages to develop end-to-end backtesting, execution, and portfolio management.
Extensive Market Research
With Quant trading, you have the advantage of developing and building strategies quantitatively. As it also uses modelling techniques to manage risks, you can be cautious and avoid losses.
Sensible Trading Decisions
If you have years of experience in trading, you would have that gut feeling that drives you to make decisions. If it is based on market insights and resources, it would probably be the right decision. Sometimes, fear and greediness can shake up your intuition, and there are chances for your decisions to go wrong.
But when it comes to Algo trading, you are in safe hands. With its pre-decided entry and exit rules, it will help you hold back emotional trading and the losses that follow.
Say Bye To Constant Market Monitoring
Trading can shake up the world second to second. You will see a completely new turn about if you miss even a mere crucial second. There is a need to monitor trading hours continuously. But with Algo trading, the defined algorithms monitor takes decisions and executes trades based on the market movements.
Algorithmic trading continues to attract more new types of traders day by day. It is primarily adopted along with onboarding of new technical solution providers like QuantTerminal to ease your transition to the new systematic trading. At the retail level, it gives the traders enough freedom to navigate the market, which is why you can reap maximum benefits from it.