Algorithmic trading is a type of trading, during which one large order is divided into many small ones, using special splitting algorithms. The price characteristics of each order are processed, and then sent for execution. The main purpose of this method is to execute orders. Everyone knows that the more an order is placed on the market, the more difficult it is to execute it, that is, to find a second party who will agree to buy or sell an asset. But if you divide it into many small ones, then the probability of their execution will become much higher. Let's take an example. The trader has 10,000 BTC that he wants to sell.

If he puts the entire lot up for sale, at an average market price of $50,000 per BTC, then the buyer must pay him $500 million. Why is it not profitable to put such an asset on the exchange? Seeing a large lot in the glass of orders, other market participants will begin to reduce the price in order to sell their assets faster, thereby the price of it will begin to decline rapidly. A large number of assets are bought by large market participants, and transactions are carried out, as a rule, through over-the-counter platforms (OTC), so that this does not affect the price of the asset in any way. It turns out that dividing into many small orders keeps the profit for the trader, because the price of the asset does not fall, and the probability of execution increases. Basic concepts As we have already found out, algorithmic trading is trading software or a trading robot. This software contains a trading algorithm: position size, take profit and stop loss, other orders, etc. In 2021, there are two main types of robots: Automated.

The bot software contains all the necessary information about the trading process, after which it analyzes the market, opens and closes transactions, and selects the lot size. Semi-automated. Here, robots analyze the market and provide information about the most relevant transactions. The right to open and close a transaction remains with the trader. As a rule, automated robots are more popular. In essence, semi-automated bots perform technical analysis that a trader can do on his own, but he does not have to pay for it. Advantages and disadvantages Algorithmic trading accounts for about 60% of all transactions in the financial markets.

With such an impressive indicator, it seems that trading robots cannot have disadvantages, but this is not so. Let's talk about the pros and cons of algorithmic trading: pros Speed. A person will not be able to simultaneously conduct a technical analysis of several assets and open many transactions, which a trading robot can handle. Accuracy. When setting opening and closing prices, extra symbols will not be accidentally set, which can happen to a person. Versatility and scalability. When purchasing a trading robot from an experienced trader, there is a chance that it is developed with high quality.

If so, then the software can be configured for trading on any markets, as well as upgraded and supplemented with new settings. Lowers the threshold for entering the markets. It's not about money, it's about knowing the markets. A beginner who has purchased trading software from experienced traders may ask for an effective working strategy. By setting it up, you can start making profit from the first days of trading. Trading robots are not subject to emotions and doubts that can interfere with trading. Trade at any time.

It happens that you have to wait a long time for the desired entry point. It may appear at a time when the trader is not able to manually place a deal. The trading robot will need a running computer and access to the network in order to monitor the situation on the market 24/7 and open the necessary transactions. Minuses Price. You will have to pay a lot of money for good trading software. If you find a cheap offer in the vastness of the network, then there is a possibility that the trading robot will not live up to expectations. technical component.

In addition to buying a robot, it must be properly configured, which implies a certain amount of technical and trading knowledge. If the trader does not have them, then again he will have to pay for it. Machine thinking. Just the fact that the robot functions according to the given settings may not work in the hands of the trader. In those moments when a market participant can abandon his strategy and conduct transactions in a completely different way, thereby retaining his deposit, the robot will adhere to the specified settings. How to be? Algorithmic trading is a good option for trading, but not everyone can do it. .