There is no better way to profit from the inefficiencies of the financial markets than through automated trading systems.
While various theories propound the efficiency that purportedly results in prices that reflect all available information, legendary investor Warren Buffett, stated that, “I’d be a bum on the street with a tin cup if the market was always efficient.” While value investing like that which Buffett prefers is one way to profit from the inefficiencies of the financial markets, automated traded systems offer unique advantages. That is especially so for individuals under current market conditions.
For value, growth, and income investing and the many variations, institutional investors have a wide range of advantages over the individual.
The superior resources of hedge funds, pension groups, mutual fund families, and other institutions result in a greater knowledge resulting from the deep and wide research departments of each. Due to the buying power of these entities, better pricing, execution, and other factors are granted that an individual will never receive as institutional investors represent much more business for wire houses. That favors the large entities much, much more in those modes of investing.
For the individual, however, automated trading systems result in advantages over major institutional investors.
When a major institution buys, it can very easily result in the price rising much, much higher due to massive size of the purchase order. That does not happen for the individual, as the transaction size is much smaller. As a result, individual investors have many more opportunities to buy and sell for a profit without distorting the price so that less in made.
Automated trading systems also allow for individuals to profit from a wide range asset classes in a variety of transactions.
Mutual funds and other institutions are limited by the charter. If the sector of the style of investing is in disfavor under prevailing market conditions, paper or actual losses will be the result. But for the individual with the proper automated trading system, profits will be recorded in the account ledge.
Many institutional investors cannot buy and sell shares under a certain price level. That leaves out many profitable opportunities in securities trading below that amount. Due to the lower prices, higher profits can result as the buy was executed at a greatly reduced cost.
It is the same with the market capitalization of stocks.
There generally has to be a certain market cap for an institutional investor to buy. That reduces the profit opportunities significantly for mutual funds and others institutional investors. It can also drive up the price of others stocks for factors having nothing to do with the value of the company. With an automated trading system, by contrast, the individual can profit from buying and selling all stocks, no matter the size of the company. Bull markets like the present reward virtually all forms of investing.
When that happens, needed risk management actions are too often ignored. But automated trading systems perform the risk management function that is needed in any investing. For institutional investors that cannot establish a short position on an asset class, risk management activities are reduced. That can result in tremendous losses or, at the least, missed opportunities for profits.
That is not so for automated trading systems.
There is a reason that a Standard & Poor’s 500 Index is the world’s largest mutual fund. More investors than any others looking to buy shares of mutual funds realize that there is no advantage with others that focus on growth, value, and income opportunities with active (and expensive) management. Automated trading systems maximize the substantial and lucrative advantages of the individual investors that can result in “Alpha,” the return that is greater than that from the market, or an index fund.
The AlgoTrades automated trading systems focus on trading only the SP500 index and proven to do well in virtually all market conditions. Learn more about AlgoTrades.net.