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Algo Trading: Everything You Need to Know

by Rohan Mathew
Algo Trading: Everything You Need to Know

Wouldn’t it be great if you could start making real money from home? Don’t you want to ditch your boring commute to work and forget about all those lame people that you work with? 

One of the best ways to get started making real money is by trading. And unlike your day job, you aren’t trading time for dollars. Instead, you are trading stocks and earning profits. Sometimes big profits.

If you want to maximize your trading game, then you need to get into Algo trading. Algorithmic trading is the process of automating your trading so that you can take advantage of split-second opportunities around the clock, rather than when you are only in front of your computer. 

So what is Algo trading, and why should you consider it as your next side hustle? Keep reading our Algo trading guide for everything you need to know about this incredible opportunity.

What Is Active Trading?

The stock market is ripe with opportunities to make money. People are buying and selling stocks all day, every day. The opportunist looks at this marketplace and wonders how they can engage and earn a profit.

The ones who do this well make a very comfortable living working only an hour or two a day. But how does it all work?

When somebody sells a stock, you have the option to buy it. If you buy a stock, and it goes up in value, then you can sell it for a profit. Ta-da, you’ve earned your first dollar.

Because the stock market is volatile, stock values rise and fall all day long. That means that at any given moment, there’s an opportunity to buy low and sell higher shortly after.

In many ways, it’s like a game. But if you learn the ropes, and build the right systems, it can become a very profitable game.

Those who buy and sell stocks multiple times per day are considered active traders, or day traders. They are different from normal investors who buy, hold their investments for months or years, and maybe sell sometime later down the road.

What Is Algo Trading?

So what is Algo trading in relation to day trading? Normal traders only buy and sell when they are awake, sitting in front of their computer screens. They manually choose stocks to buy and sell, pressing buttons on their computer all day long.

While this can work, it’s not the most efficient trading option. Algo trading, on the other hand, uses algorithms to buy and sell for you, so long as a transaction meets the parameters that you set.

So if the biggest opportunity to make money happens while you are sleeping, or on the train to your mom’s house, your algorithm takes advantage of it on your behalf.

This can radically improve your performance as a trader. And if you set it up properly, can greatly reduce your workload, paving the way to a mostly passive source of income. 

On top of this, algorithms can function without human error or emotion. It’s all virtual and can complete transactions based on facts, information, and accurate data. No more making a bad call because you feel it in your gut.

How to Get Started

Wondering how to get started trading, and then implementing algorithms? First off, you’re going to need to learn Algo trading basics. There are many videos online, as well as courses, books, and podcasts you can go through to learn the basics of how the market works and what you are looking to accomplish as a trader.

Education is everything and can often take years for a trader to be confident enough in their decision-making to make real profits. As you get started, spend all of your free time learning, especially since so much information is available for free at our fingertips today. 

Then it’s time to get the gear you need. You’re going to need a powerful computer. Basically, you’ll want to buy the most powerful computer you can afford, with plenty of memory and a high-speed processor. 

You’ll also want multiple monitors so that you can see what’s going on in the entire market. Invest in a quality desk and office chair for maximum comfort while you work in your home office.

You also need to ensure your power supply is never interrupted. In the event of a power outage, you need your gear to keep running. An uninterruptible power supply, or UPS, can kick on immediately should your computer ever lose power. 

Even though you plan to set up algorithms, you need to know how to actively trade, as you’ll still be doing this from time to time.

How to Be Successful

So you’ve got your gear and you have a good understanding of how the market works, right? Maybe you’ve started trading and even earned a profit. Great, it’s time to set up your algorithms. 

One of the first Algo trading tips you need to hear is to get the right trading platform that will allow you to set up and manage your algorithms with ease. There are a number of these available and they are your most important consideration, so don’t make this decision lightly.

Once you get started, you also want to make sure you are using dollar based stop losses, which is going to make your life a whole lot easier. 

There are a ton of strategies to try, based on the markets you are most interested in and your specific goals. Consider the trend-following strategy as a beginner, which is the easiest to implement. You can initiate trades based on the positive trends you are looking for each day.

Otherwise, you can start looking for arbitrage opportunities or pursue other advanced Algo trading strategies. 

Never Give Up

Algo trading is a lucrative opportunity. It’s created plenty of millionaires, plenty of happy people earning extra money, and plenty of losers. Just remember, each time you fail, you have the opportunity to learn and improve.

Don’t give up. Giving up is the surest way to become a loser.

Looking for more information like this? Be sure to visit our blog today to keep reading.

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