Algorithmic trading is a fairly complex field and for most retail traders it gets painfully difficult to make algos that will work for them, but there are number algorithmic vendors who can provide signal generation software which a retail trader can subscribe and benefit from that, still I think there are critical questions that needs to be answered;
Algorithmic trading not equals to HFT !
Algorithmic trading has countless variants and HFT is one of them, algos can be used by all sorts of traders in all time-frames, unfortunately media coverage reports only HFT for their sensational values, this creates a wrong perception is built on retailer traders about algorithmic trading
Can algorithmic trading provide profits on its own with any human assistance ?
A: The answer to this question is not yes or no for most cases, it is true that there exists fully auto and intelligent which can operate on its own but they are hardly shared. there are “options” algorithmic which can provide some profits on their own, however they might not be enough.
If algorithmic trading does not produce profit on its own then are they are useless !
A: To summarize most algorithms work in conjugation with “news and manual analysis” and together they make up a profitable trading system. Primary goal of these signals are to avoid emotions, over-trading and strictly implement risk management which grapple in a manual trading.
Algorithmic signals allows you to enter a trade with a good risk-reward setup without adding too much delay in entries and timely notify you whenever a trade opportunity arises.
Then how do we actually use an algo system ?
A: As discussed earlier one should not run the algos on a random basis and expect profit, first you need to arrive at bullish or bearish sentiment for the day by doing manual analysis and then apply a signal in a suitable script and in a correct direction (buy or sell)
An automated algo trading deprives us of human involvement in trading !
That’s one big misconception, an algo trading is more about trade execution, but the planning and analysis still required and done by a human analyst, that way correct tools are utilized in proper areas. Human brain is very efficient for static analysis but delivers very poor in live markets, this way we split the work between two great masters, Brain and Machine.