It may surprise you to know that all the way back into the 1930s and 1950s the likes of Harry Markowitz and others were knee-deep in big data.
It’s all relative since big data before computers could mean an equation that took someone an hour to find the solution to. Except you have to do it again for the next value in a set.
But when we’re talking about big data, there are few streams of big data humans can’t handle efficiently like trading on markets. Enter: algorithmic trading.
So what’s the best trading algorithms you can use to make wading through all that big, unpredictable data easier? Keep reading to find out!
What Is Algorithmic Trading?
Put very simply, an algorithm is a set of rules and an order of operations based on those rules. If this, then that.
Computer codes are algorithms, AIs use algorithms to guide their decisions, and we use algorithms (discretely) in our subconscious. Basically, we “feel out” problems through experience and intuition.
But our subconscious brains are secretly churning through calculations to predict the future. The problem is when we add emotion into the mix as well as our conscious mind.
Our conscious mind is too slow to handle the stream of data needed for complex and fast predictions based on numerical fact to make a decision in time when it comes to trading.
Our subconscious isn’t capable of rationalization and decision-making of this kind. It’s muddied further by other algorithms behind “FOMO” trading and emotion geared more for surviving in an ancient wilderness.
This is why we let computers do our trades now. No more emotion, no more psych-outs.
How Do You Pick the Best Trading Algorithms?
If you want to know on a professional level how to pick and use algorithms for trading (algo trading) there are excellent mentors to choose from, such as kjtradingsystems.com.
If you need a quick guide to the best trading algorithms as fast as possible, here’s your algorithm for success.
- Determine if an algorithm exists to buy that needs your needs
- If an algorithm doesn’t exist, build it
- Plug it into real-time market and company data
- Connect it to the markets you need to trade on
- Determine the time delay (latency) and if its going to be worth it for you
- Ask, can you customize and configure your algo?
- Can you write your own programs in your trading software?
- Backtest your algo on old data to see if it performs well
- Finally, integrate it into the open world
Most important of all, know how it works. If you don’t understand what you’re automating, you shouldn’t be trying to automate at all. Automation is a powerful and risky tool when you don’t know what’s getting automated.
Best Trading Algorithms in a Nutshell
There are a number of excellent trading algorithm software to get you started. One of the top favorites among algo traders overall is MetaTrader 4, followed by Wunderbit for exchange rates, and Trality if you’re into crypto arbitrage.
Start with those three before trying to build one of your own.
Happy Algo Trading
We hope you learned something important about the best trading algorithms. Most are extremely complex with a lot of buttons, knobs, and whistles. Knowing what they all do and why they are there is as essential as a pilot knowing what’s in his cockpit.
Remember, risk is always there — especially with algo trading. Need to know how to deal with it? Keep reading our articles for the best financial advice, tips, and tricks on the internet!