The algorithmic trading system has been gaining popularity thanks to its high success rate in predicting outcomes of stock prices that provide investors high yields in the stock market. Although the system is just new in the market, the attractiveness of the platform and the positive performance it has shown recently makes it a lucrative investment option for many. One of the reasons of the high success rate of the platform is the use of traditional marketing strategies such as technical analysis. Below are some of the benefits of using technical analysis with algorithmic trading.
Data and Information
The algorithmic trading system makes use of computers that inevitably use mathematical models to analyze data and information that it receives before executing a buy or sell order. Technical analysis provides some of this information as it concentrates on the stock price movement as well as makes use of other key indicators. Most brokers use technical analysis to check for an existing pattern by viewing the past movements of the stocks they are interested in. Many technical analysts also believe that history tends to repeat itself and with that, many investors look at the stock’s history and past prices to predict future stock prices.
As all prices are patterned in a chart or graph line, brokers can predict more or less the outcome of the stock. However, studying the charts would take some time, thus reducing the chance for brokers to act on the opportunity. Combining the analysis with the algorithmic platform reduces the time wasted as the system will automatically study the patterns and make recommendations in less time thus making it easier to grab investment opportunities.
Can one use Technical Analysis Alone?
Although many stock investors use technical analysis in the traditional stock market, it is not advisable to use it solely on its own. Like any trading strategies, there are some pitfalls and since interpretation may be made with human emotions or biases, it might hurt one’s chance to earn more. This is the reason it is only one of the key indicators in the algorithm system for major trading companies.
However, it is still important that one learns how this strategy works, especially for traders who are interested in setting up their own trading platform. By compiling the data and running it through the system, traders would easily identify past patterns or breaks which they can capitalize on to earn more.