Algorithmic Trading Systems – The Pros and Possible Cons

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Algorithmic trading describes the use of computer algorithms to help the minimization of the market impact of large trading blocs, stocks and other finances. The biggest benefit of using algorithmic trading is that it reduces the amount of possible human error, and emotional trading.

Thus, expediting the desired trades within a specific criterion. The algorithm used breaks down large trades into simpler elements using highly specific criteria so that the price of the asset or stock is not affected greatly and thus aids in expediting large trades and minimizes losses. As vital and as helpful algorithmic trading can be, there are many pitfalls one can fall into if you are not careful.

Machines can fail

Automated trading in theory can seem simple with three supposed steps; set up, set the criteria, and watch the magic happen. Unfortunately, the trading systems are not infallible which, such as the case with all things automated. One single mistake can quickly become a major hindrance in your trades, as one change can alter hundreds of trades within seconds, and thus causing major financial losses. These systems require someone to watch the trades as connectivity issues, systemic anomalies, power outages or computer crashes can cause duplicate, erratic orders or missing orders.

With proper monitoring any glitches or problems can be identified and resolved efficiently. The success of your trading systems are dependent on the criteria set in place by you when first setting it up, which companies like KJ trading systems can help you define. It is also generally recommended that you host the system on a server, since many services that offer servers also offer commercial space and the automated trading system can scan and execute trades this can increase the potential speed and reliability of the trades.


There are many companies out there that can claim to help you set up trading systems and teach you how to use them to best benefit your company. Promises of high profit and low investment are widely used to lure people in, if you think that the deal is too good to be true then that is likely the case. A few things to look for when trying to find a new system are whether or not the website has a trial period, do your research about the system, and scrutinize the terms and conditions. Another way to ensure the authenticity of a system is to look for testimonials of people who have used them. Ask many questions, as it is better to be cautious than make a mistake and lose money in the process.

All in All

Algorithmic trading systems have steep learning curves, and if you are unprepared you may lose more than if you simply did the trades yourself carefully. Although, there is great potential one you set up your trade criterion, there is also great risk due to the systems natural ripple effect. Algorithmic trading is greatly used in large corporations and helps to hasten trades between them. Ask a lot of questions, and work with a professional before you move to an automated trading system.