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What is the main benefit in Algo trading v/s that in Discretionary trading?

Algorithm trading or algo trading is a computer-based program that follows pre-defined instructions to carry out trade. Algo trading finds out trading opportunities at such high speeds which is impossible for a human trader to track. Algo trading has many benefits over discretionary trading, they are as follows;

No Constant Monitoring

Algo trading does not require constant monitoring because there is minimum human intervention in this type of trading. Whereas, in manual trading, you need to sit in front of the trading terminal constantly to monitor the change in prices which is not possible for a salaried person.

Risk Management

Algo trading is ideal for those investors who cannot set proper stop losses for their trades. In this type of trading, the order mechanism has proper risk covering with stop losses in place. Therefore, this helps in money management and benefits in the form of more profitable trades.

Psychology Management

When you are trading manually there are chances that you may make wrong trades due to human emotions or other reasons. But with algorithmic trading, there is little or no scope of making such mistakes. Algo trade is done with accuracy by following predefined programs. It helps to manage trader’s psychology relating to greed and fear.

Cost Reduction

Algorithm trading requires a minimum human intervention which means that time spent on monitoring the market is reduced drastically. Therefore, this time can be used as an opportunity to engage in other money-making activities. This ultimately leads to a reduction in cost compared to discretionary trading.

The above mentioned are a few of the benefits of the algo trading over discretionary trading. If you want to trade using algo trading mechanism or open a demat account, you can contact

Indira Securities, Stock Brokerage Firm in India

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