Algorithmic trading is the execution of trade orders according to pre-written parameters without human intervention. In other words, the automatic execution of investment decisions by a computer algorithm.
Investors have always been motivated by one goal: higher profits. Online trading has paved the way for countless innovative opportunities to defeat the markets.
Automated trading systems can be said to be relatively young. Before the 1970s, there would not even have been a chance to create such systems. At that time, however, the New York Stock Exchange introduced the so-called DOT system, which made it possible to transmit orders electronically. This change also paved the way for online trading as it is known today.
The next step was the ECN
Before the 1990s, trading was much more exclusive. Only stock market participants could trade at the exchange. After the birth of the electronic communication network, this was no longer the case. With the Internet, the world of traders has also changed. Today, anyone can immerse themselves in trading with even a device like a smartphone or a laptop, but this has not always been the case.
With the development of the Internet and information technology in general, the development of trading algorithms also began. The first automated trading system that has been consistently able to outperform human traders was created by IBM in 2001.
Although trading is nowhere near as unattainable as it was before the 1990s, we can say that professionalism still remained in the hands of the institutions. The world’s largest banks have developed their own trading algorithms, which have been given atmospheric names like Chameleon or Sniper.
What are the benefits of automated trading?
The ability to trade without emotions
I think I can safely say that every active trader had to struggle with their own psychology. Our brains are programmed to save us from pain. It is this mechanism that comes into play when we enter a trade and it goes against us (or just when we want to close a low-profit trade). Behind the anxiety we feel at this time — which will eventually force us to break our rules — are our emotions.
Perhaps the biggest advantage of a trader bot is that it has no emotions. It is ready to execute the strategy accurately according to its pre-programmed parameters. Emotional execution is essential for successful trading. No one can make a profit in the long run if they keep breaking the rules of the strategy.
Why is it so important to always adhere to them?
Imagine the following simplified situation:
Five out of ten trades would be winners with a 1/2 risk to reward ratio. That means we would be in net profit, even though we lost the other five. However, t is not uncommon that the trader is unable to wait until the five winners reach the target. He closes prematurely because of his anxiety and fear of turning around.
We all have been there.
A human also has biological needs. The human trader must sleep every night. However, the market — especially the crypto market — is not asleep.
Trade opportunities do not tell you in advance when they will appear. They even can appear when we can’t trade. At the time we might think it doesn’t matter, we’re getting into the next trade. In the long run, this can be very harmful to profits. This is because we may be left out from those trades that would have pulled our account into surplus.
The ability to develop emotionally consistent trading takes a lot of time. Even if it succeeds, biology will always remain an obstacle. The trader bot, on the other hand, executes hundreds of trades precisely and consistently without any problems. As we can see in the picture below, Bot has already closed 687 trades.
The b-cube.ai FinTech startup specializes in the development of profitable trading bots. Developed with quantitative models and artificial intelligence, also used by institutions. Trading bots deliver satisfying results to anyone who wants to see more profit from their rounds.
The Bulls and Bear Swing Bot does not trade every single day. It is designed to get in only when it considers the situation to be the safest. This avoids high drawdowns and brings better profits.
Trading cryptocurrencies involves risk. The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the article’s content as such. Author, website or the company associated with them does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.