The investment world has been completely re-shuffled in the last ten or so years, with the advent of electronic trading systems. Algorithmic trading systems, or algo trading, have been a massive hit in the investment world for the last few years as they can quickly provide statistics and data that would take hours of research for a person.
More hedge funds and large investment companies have moved into the world of algo trading to help their performances in the markets, as well as providing an extra level of security when investing huge sums. The software itself has become even more powerful as these firms look to improve the software even further to give themselves an even bigger edge.
The Point Of Algorithmic Trading
Algorithmic trading was first designed to help split larger orders and to help cloak the intentions of a buyer. Algo trading has evolved, however, and many different systems now make up the way it works. Roughly three quarters of the trading done in the US today is done through algorithmic trading systems. The real key to success though is having quick and responsive computers with fluid networking,
So what has the integration of automated trading technology done to the private investor? Once seen as necessary for the industry to function and maintain balance, the private investor has almost been made obsolete by the likes of algo trading systems. As big companies turn to faster, more efficient methods of data collection private investors have moved into trying to exploit gaps in the program. Although extremely powerful, there are some chinks in the armor of algorithmic trading.
Algorithmic trading is used for short-term advice and making sharp decisions, something which they can do much quicker than any investor no matter how in the know they are. However, investors can now help companies develop for the long-term by giving information to do with future forecasts.
Because some investments can have longer holding periods, it makes the investors information worth more again. This is because the investment will become a medium to long term attritional investment opportunity rather than something which can be jumped on quickly. If the holding period is moved to even just weeks, then a private investor can get ahead of the algorithmic trading systems for information and advice.
Although analysis of stocks and the like can provide another weapon in a private investor’s arsenal, they can also provide a bit more detail regarding the company itself rather than just the stock performance. For example, you would want to know about the cash flow and earnings of a company in comparison to their competition for your investment before you get involved.
A private investor can give you this information more readily than algorithmic trading can, which makes them more suited to long-term development and investment strategies aimed at growth over a longer period. As software becomes more powerful for investors as well, they will be able to integrate all of the information they require to make massively detailed reports for the short to long-term of a stock or investment opportunity.
It means that companies that are looking to make quick injections and investments into particular markets can find the information they need much faster through an algo trading platform. However, a clued up private investor can use these tools and additional research to provide a more long-term view. It all depends on your angle and your aims what suits you best!
The Best Algorithmic Trading System for Individual Investors looks to be the AlgoTrades.net system I think.