Thinking of Algo Trade may Sound Great but are these Traders making money? Read this very carefully before late

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A lot of people nowadays thinking of Algo Trade which may Sound Great but are these traders making money? Before jump on algo trade read this very carefully.

It may initially sound inspiring, but are they work?

What is algo Trade?

Algo trades are the trades taken by the software based on trade signal generated by the formula.

So in short something programmed in software which generates buy sell when conditions satisfy and then trade will punch to broker terminal by the software.

Are these trades working?

As per data nowadays, more than 50% of NSE trades will go by algo mode.

But the real question is this the guys doing this algo trading are making better trades than manual trader?

The answer will be no. It is just excited that we need not do anything and the machine will do everything.

A lot of promises in between this will happen that will happen.

But when it comes reality, a disciplined manual trader is far better than the algo trader.

1. Algo trader will punch when his conditions satisfy all order despite understanding market conditions as a result of this a massive amount of buy-sell may be on the system which ultimately benefits your broker only.

In short, your algo machine will work for two people

A. For your broker by making a massive amount of brokerages unknowingly everyday basis.

B. For whom you have paid a considerable amount for all these setups.

So after losing a healthy amount of money, you will understand you are losing money in a faster way than you may or may not be loose in a manual trade.

2. Let us take an example

Suppose your algo conditions satisfy and it buys XYZ stock at 1000 Rs with a Stop Loss 990 and Target 1020 now due to some market fluctuations Stoploss taken and again stock moving up to 1000 again your algo buy again Stoploss taken.

As no manual intervention in between, there is a very high amount of chance all may have lost entire capital also in a single trade.

Now many programmers will argue we can set max loss in the system.

Yes, this is true but even a 30k loss back to back few days will wipeout total capital in a few days.

Which if you trade manually you may profit in the same trades.

3. In any unnecessary situation, system failure or say something happens to your system. No one can say this cannot occur; there is a very high chance. All capital may vanishes in a single day when you busy in other Work your machine wipeout total capital.

4.So to do in algo trade more and more actually will benefit the brokers mostly as a very healthy amount of everyday brokerages will be in their pocket. So will you like to waste your full energy unknowing for working for other people ask before you go for algo mode.

5. Some article said Algo trade would reduce the transaction cost.

Is this true? A big no because in algo mode it will punch more orders than a human can manually hit, so the question of reducing transaction cost reversed.

It actually will increase your transaction cost by a few times and will benefit your broker only.

6. “The greatest portion of present-day algorithmic-trading is high-frequency trading (HFT) is also

told by algo makers, and a large number of trades can punch instantly.”

Yes, this is very true.

But who will benefit out of this?

Your system will buy sell randomly say 100 order place in a micro sec, and for all 100 orders, you have to pay all brokerages.

You a massive amount of brokerages will generate in the system, and you will see your entire capital will vanish speedily.

7. Now come to the question of backtesting some algo maker can show you various graphs and showing a considerable amount of profits in the system. In an actual trade, nothing will happen as in those calculations system will take a special price.

Where in actual trade-in transaction that price may trade execute may not most of the time there

will be the difference between executed price trade and backtesting price.

And this is more than enough to wipe out full capital by the machine in a speedy manner.

So next time when you are thinking for high ambitious Algo trading read this article very carefully.

The trader who already did Algo trading and lost all capital we hope will fell very painful after reading this.

But it is not late to modify your style of trade rest market will pay you sure.

So to conclude, we advise all to stay away from this Algo mode trade and protect your capital. Your head is infinity times better than these machines.

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