Algo Trend Trader: Legit High-Frequency Trading Program?
This review on Algo Trend Trader will update as more information becomes readily available but while we are here we might as well touch on the topic at hand.
Algorithmic trading refers to a type of trading where powerful computers are involved to solve and run complex mathematical formulas that are useful for trading. An algorithm is simply a combination of directions used in solving a problem.
An algorithm can be presented as an algebraic equation in combination with the prescribed rules of the algebra. With the two elements, computer experts can use the same to get the answer to the equation every time. While algorithmic trading involves the use of complex formulas, it also entails mathematical models and human oversight in order to make decisions to purchase or sell financial securities on particular exchanges.
Algorithmic traders utilize high-frequency trading technology to enable them to conduct multiple trades (tens of thousands) per second. This form of trading is ideal in a variety of situations especially for executing orders, trend trading, and arbitrage strategies.
Key Takeaways of Algorithmic Trading
- Algorithmic trading uses algorithms that are rules-and-process-based to initiate strategies for trading.
- Algorithmic trading has become popular since the early 1980s. Both institutional investors and large trading firms now use it for various purposes.
- Algorithmic has notable advantages including faster trade executions and reduced costs. However, it can also worsen the market’s negative tendencies through an instant loss of liquidity and flash crashes.
Trend trading refers to a type of trading that depends on a stock’s momentum in a specific direction, which could be increasing or decreasing. Other than the movement of stocks in a specific direction, trend trading utilizes fundamental data and various indicators to determine market trends—whether they will continue or not.
All the same, trend trading depends on data analysis and statistics to decide when to purchase or sell stocks. Trend traders do not just listen to news stories pay attention to rumors and tips from analysts.
Trend traders use technical indicators to determine future share prices. The indicators are not from the real fundamentals of the company. Instead, they are from the metrics of the asset that arise from the general stock price activity. Common indicators that traders and analysts observe in trend trading include:
- Moving Averages
- Relative Strength Index (RSI)
- On Balance Volume (OBV)
Traders utilize these indicators in several multiple ways to predict buy and sell signals. While trend traders utilize statistical support to execute trades, it cannot eliminate the uncertainty and risk that often accompany the trading process. Besides, traders usually would want to buy and sell stocks according to the strength of the trend. This implies that traders have to check hundreds of thousands of stocks to land the best opportunities.
Besides, most market analysts and investors accept the fact that “the trend is your friend” regardless of whether they accept the best strategies to find the strongest trends.
Traders are unique individuals with different methods of approaching the market. They also have different levels of commitment and perspectives. Additionally, there are differences regarding the size of trades they execute, and in how they determine which stocks can yield better returns.
While some rely on news stories, rumors, and analyst tips, others utilize fundamental analysis in various ways. Algorithmic trading enables traders to absorb excessive amounts of information, whereupon they filter noise from the trend and apply both types of data to determine future stock trends.
Now, will the reported-new Algo Trend Trader live up to its potential or will it be another half-baked trading software designed to make the seller rich, not the user.