What is Robo Trading and how it works? Explained

The financial market is evolving rapidly and so is trading. Many leaders in India as well as from international markets are emerging to make healthy financial decisions based on new-age trading systems. They are opting for algorithmic trading using API-based integrations also known as Robo Trading and Algo Trading.

For effective trading, there is a multitude of methods available to deploy the best strategy. All of them work on specific market conditions – scalping, intraday trading, swing trading and positional trading. Out of all, any trading where time is not too less not too high is considered ideal for Robo or Algo trading. 

What is Robo Trading 

Robo trading is systematic trading that works on pre-defined logic and controls human emotions. By eliminating the scope of manual errors, Robo trading can be executed in lesser time with more accuracy.

Robo Trading: Concept 

Pawan Matade, founder, DeMatade Solutions, said that algorithmic trading is a more complex investment strategy that uses computer programmes to make buy and sell decisions for investors. 

"They also tend to be cheaper than human financial advisors, which makes them a popular choice for people who are looking to save money on their investments," he said, adding that it is useful for people who don’t have a lot of experience.

Algorithmic traders use sophisticated mathematical models to predict market trends and make trades accordingly, Pawan said.

Financial planning or decision-making has always been a challenging task for new-age traders. Years of experience are required to evaluate the market conditions and consider investing before making a decision. The complexity and severity of risk involved in trading make it even more difficult for newbie traders. However, technology has transformed the scenario. 

As a traditional approach, traders have to depend on chart patterns, indicators and other information to go for the right trade. This creates challenges for non-full-time or non-expert traders to enter the stock market. 

Robo Trading: How it works

With accelerated digital adoption, next-gen traders are leveraging hassle-free trading experiences across the globe.  Robo trading controls human-based interferences and helps the traders trade based on the pre-defined condition set in the computer program. 

He said that automation of the entire trading system also restricts the traders' interaction with others on the investment decision. "It benefits traders with its pre-defined algorithms that help in better financial decision making."

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