What Is Algorithmic Trading? The Basics Explained

Are you one of the lucky people who know how to make money in the markets? Lots of people aspire to become successful day traders, but few ever make a profit.

If you are consistently profitable, that probably means you spend a fair bit of time analyzing the market and pouring over charts on a daily basis. Even though it’s worth it, there might be a better option for you; algorithmic trading.

Rather than having to do it all on your own, you can create algorithms that trade your strategy on your behalf. Imagine having multiple traders, all executing trades following your guidelines.

You can multiply the number of trades you can get into and out of. And as a result, you can multiply your profits, too.

And the best part? You don’t need to stare at your charts all day long anymore. Want to learn more? Keep reading to understand how it all works.

Why Get Into Algorithmic Trading

When asking for investing advice, any successful trader will tell you that success in the markets is all about time in the markets. Not only does it take a lot of time to learn how to trade in the first place, but it also takes a lot of time to look for trades even after you become successful.

So while traders can make a lot of money manually entering trades, they also have to trade a lot of time to make it happen. Once you know how to make profitable trades, you should then figure out how to start doing so without trading your time.

That’s one of the main benefits of algo trading. Your trades can execute automatically. So you can focus on other things. Heck, you can even forget to look at the charts for a day. Or a week.

Go on vacation and keep making money through automated trading. Or watch Netflix all day, if that’s your thing. By implementing a successful automated trading system, you are free to spend your time as you wish. And that’s true financial freedom.

Algorithmic Trading Basics

So what is algo trading? It’s one of the hottest investing tips you’ll ever hear about. It’s the process of programming algorithms to trade on your behalf. Think of it like trading robots.

They are just lines of code on your computer that execute trades according to the parameters you set. And with platforms that already exist, you don’t have to code these algorithms from scratch. In fact, you can follow existing strategies and systems like KJ Trading Systems for a headstart.

Rather, all you really need to do is have a trading strategy that you are confident in, that you’ve tested and made profits with. Then, according to the trading patterns, chart patterns, and entry and exit strategies associated with your strategy, you program the algorithms to trade accordingly.

If done properly, these algorithms would make the same trades you would, if you were actively scouring the charts.

A Strategy Worth Pursuing

While algorithmic trading isn’t exactly meant as an investing for beginners strategy, it will take your trading to the next level once you’ve learned how to profit in the market. It’s the next step forward when moving towards financial independence, and it can set you free to make more while working less.

It’s definitely worth pursuing, even if it takes a long time for your system to become successful.

Looking for other ideas like this? Head over to our blog to find more helpful content.

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