Time is the world's best commodity. Faster airplanes, more expensive drugs, and technologies are invented to save time. So speed is very important in the stock market. Winners are those who take the right decision at the right time and make a profit in the stock markets. Automated trading software called Algo Trading is the computer technology that simplifies this process for humans.
How did Algo trading start?
There are countless mathematical formulas used in the stock market. Many mathematical formulas were invented in the 1900s when the stock market started to spread. Among them, the Elliott wave theory, which was discovered by an accountant named Ralph Nelson Elliott in the 1930s, is very popular. Based on this, when a wave occurs in the stock market graph, if three waves rise above each other within that wave, then two smaller waves descend one after the other. A closer look at these waves also shows a similar pattern of three ups and two downs.
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Ex-Official Shares Stock Market Secrets with Himalayan Preacher. Similarly, the Fibonacci sequence is very popular in the stock market. There is a theory that if the stock market takes a trend to go up or down, its subsequent changes will be based on this. That means adding the current price and the previous price to get the next price.
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Innumerable mathematical formulas like this are developed by analyzing past stock market trends. Computer programs are written based on these mathematical formulas to buy and sell shares in the stock market. With it, decisions are made quickly and automated trading takes place.
It has been in practice since the advent of computers. The stock market has become fully automated since the introduction of the Internet. Large investment firms, mutual fund companies, and insurance companies that invest in the stock market all practice Algo trading widely. Because they are the biggest buyers and sellers of stocks. So human decision-making skills alone are not enough, automated trading will give good results.
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