Today in this article we will discuss that how trading with algo is better than manual trading and how it can improve your trading journey and we will also discuss that which platform are best to use algo trading
In today’s digital age, there are two ways to trade the stock market: one is manual trading, in which a human makes the trades themselves, and the other is algorithmic trading, in which computer software automatically operates according to predetermined rules.
Many people ask this question: “Is algorithmic trading better than manual trading?” We will answer this question in this article, in simple and straightforward language.
What is Manual Trading?
Manual trading means that a human makes decisions using their own brain: when to buy, when to sell, how much money to invest, when to exit. This is so tough and so complexing as we have emotions and we make decision as per our emotions and mood swings.
Example:
You open the market, look at the charts, read some news, and then press the buy or sell button. This method depends entirely on the human being: their understanding, their feelings, their experience, and their time.
What is Algorithmic Trading?
Algo trading involves automating trading through computer software means a a platform or a software execute your trades as per your defined rules and combinations.
In this case, a program works according to predetermined rules. Such as:
- Buy if Nifty rises 50 points
- Sell if the RSI exceeds 70
- Apply this strategy between 9:30 and 10:00 in the morning.
- All these tasks are performed automatically without any human having to press any buttons.
Question: Why is algorithmic trading better than manual trading?
The Changing behavior of the Stock Market- There has been a huge change in the stock market in recent years. Previously, people used to buy and sell solely by hand; now, trading through technology has become commonplace. In particular, algorithmic trading (Algo Trading) has given investors and traders a new direction. Now, even ordinary people can trade using software and save time, effort, and errors.
Choose the Right Path Wisely
Every trader’s needs and experience are different. But if you want to stay in the stock market for the long term and create a stable income stream, then adopting algorithmic trading instead of manual trading can be a smart decision. This doesn’t mean that manual trading is wrong, but in these times, it’s advisable to enlist the help of technology.
Now we know why algorithmic trading is ahead of manual trading. Below, we list 10 reasons that will resonate with investors of all levels.
1. Protection against human error
- Many times in manual trading, a person makes wrong decisions out of haste or fear.
- Whereas in algorithmic trading, there is no emotion.
- Only established rules apply. This greatly reduces the possibility of error.
2. Quick and instant decisions
- Computers are many times faster than humans.
- Where a human takes 5 seconds to press a button, algorithmic trading completes a trade in less than a second.
- This provides better entry and exit.
3. Continuous 24×7 Monitoring
- In manual trading, a person gets tired, takes a break, or falls asleep.
- But algorithmic trading continues to run through the system.
- It activates as soon as the market opens and monitors every second.
4. Saves Time and Effort
- Once algorithmic trading is set up, there’s no need to review it over and over again.
- Manual trading requires you to be glued to the screen all day long.
- But you can spend your time doing something else.
5. Run Multiple Strategies Simultaneously
- In algorithmic trading, you can run multiple strategies at the same time, such as:
- an option trade
- of other stocks
- The third is an index fund
- Whereas in manual mode, a person can only see one thing at a time.
6. Backtesting Function
- In algorithmic trading, you can test your plan with historical data.
- You can see how your system would have performed previously.
- This is very difficult to do in manual trading.
7. Trade Free of Emotion
- In algorithmic trading, the software is free of emotions.
- The work is done according to established rules.
8. Limit Your Losses in Advance
- In algorithmic trading, you can establish in advance that
- How much loss can you tolerate in a day?
- When to Close a Trade
- When to Take a Break
- In manual trading, people often don’t exit even after suffering large losses.
9. Don’t Overtrade Emotions
- In manual trading, a person often trades repeatedly throughout the day; this is called overtrading.
- This doesn’t happen in algorithmic trading. Any limits set in the system are the only things that work.
