If you have not yet jumped on board with algorithmic trading, then you are probably beginning to feel that you are increasingly disadvantaged because you are trading against machines. Here are some tips that can help you survive in a world of increasingly more algorithmic trading:
Bury Your Emotions with Algorithmic Trading
Never let your heart or your gut rule your trading. The moment you react emotionally to a sudden surge or dip in the price of one of your investments, the damage has already been done and it’s too late to take it back. Machines don’t feel, and they don’t care how you feel. You have to meet them on their own terms if you plan to meet them at all.
This is not to say, of course, that you’ve got to live your life as an emotionless robot. Just keep the emotion out of your trading life. Your trading rivals aren’t encumbered by it, and if you let yours rule you, then you’ll be at a distinct disadvantage.
Algorithm Trading – Don’t Try To Out Pace The Machines
They’re faster than you. They always will be faster than you. In fact, as time goes by, the gulf is only going to widen. You can’t hope to compete in terms of speed, so don’t try. This means that you likely won’t be able to take advantage of the sudden volatility spikes that can sometimes occur in the Algorithmic trading world, as these can be here and gone before you finish calling your order in. That means you can’t exert a fine grained control over your market timings and will have to limit yourself to buying and selling on bigger, longer lasting trends. That’s not the end of the world, but it’s an important note.
If you can manage to do those two things consistently, you can survive, and possibly even thrive in an increasingly algorithmic trading world. Of course, the best piece of advice of all would be to begin using a proven algorithmic trading system, thereby leveling the playing field.