Algorithmic trading is a trading style that is not easy indeed, but not so difficult that you be fearful of this approach and methodology. Once you decide to step forward in the algorithmic trading domain and pick up the core of the concept, it starts to align with your trading journey. Let us find out more about how you can overcome the fear of algorithmic trading.
This article covers:
- What exactly is the fear of algorithmic trading?
- Why should you eliminate the fear of algorithmic trading?
What exactly is the fear of algorithmic trading?
There can be different kinds of fears related to algorithmic trading for each reader. Here, we have mentioned a brief list of common fears that might be stopping you from beginning your journey in the algorithmic trading domain. They are:
- Fear because the concept of algorithmic trading is not clear
- Fear of learning the technicalities
- The fear of no professional support while practicing algorithmic trading as a beginner
Fear because the concept of algorithmic trading is not clear
In algorithmic trading, most people fear this approach since they are not sure of what lies in this contemporary practice.
Solution: There is no need to fear the unknown in algorithmic trading as a beginner. You can find some meaningful courses to help you at every step of learning as well as for the practical journey in the algorithmic trading domain.
Fear of learning the technicalities
Fear of learning the technicalities is what stops many from picking up algorithmic trading. The technicalities include machine learning, programming, mathematics, quantitative analysis, backtesting and risk management.
Solution: While the technicalities of algorithmic trading may sound and feel too complicated, they are not! You definitely need to devote time, effort and be dedicated to learning them but that does not mean you, as a complete beginner, can not learn the technicalities. The only thing is to find the opportunity to pick up the particular learning platform that serves your purpose.
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Fear of no professional support while practicing algorithmic trading as a beginner
Once you have learnt the fundamental concepts of algorithmic trading, the journey of the learning process may end there and during the practical application, you may not get any support.
There can be several reasons such as an error while applying the same concept that you learnt because of any technical issue with your personal system or a problem with the coded strategy that you may be applying in the live market.
Solution: This is definitely a valid fear but if you wish to continue getting professional help during your practical algorithmic trading journey, you must pick the learning from a platform that provides so.
Or else, you can also opt to ask questions in a community that answers all your queries regarding the practical application of algorithmic trading.
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Why should you eliminate the fear of algorithmic trading?
Let us now find out what are those points depicting the qualities that are actually the strengths for any individual with regard to stepping in algorithmic trading domain.
It is possible that you already possess the qualities for beginning your journey with the contemporary approach to trading but you have not realized it yet.
You must eliminate the fear of algorithmic trading if:
- You believe in your capabilities
- You are an experienced manual trader
- You are not experienced at all and wish to start learning algorithmic trading
- You are learning from a professional
- You have realistic expectations from algorithmic trading
- You are using risk management skills in algorithmic trading
You believe in your capabilities
When you believe in your capabilities after deciding to take the algorithmic trading route along with the hard work, you must beat your fear and go forward. You need to trust that the algorithmic trading route is the way to go about your trading journey before you begin.
Also, you should be ready to take the necessary steps needed for learning and/or for taking the practical steps in the live market.
You are an experienced manual trader
Being an experienced manual trader is one of the indications that you can step into algorithmic trading without a doubt.
Since reading the financial market and the creation of trading strategies is not a problem, a manual trader can learn the other requirements such as programming, backtesting, and machine learning. With due efforts and time, the transition from manual trading to algorithmic trading is not a problem.
You are not experienced at all and wish to start learning algorithmic trading
It is not that only experience in something to do with algorithmic trading or a background in the trading journey that can only help. In case you are not at all experienced, you can still pick up algorithmic trading from scratch.
For instance, take a look at the journey of Eriz Zárate who, being from a pharmacy background, not only learnt algorithmic trading successfully but also became a quant and started his own company.
You are learning from a professional
Learning from an acknowledged professional always helps give the right start to anything new. And, so is the case with algorithmic trading. A professional can teach you the depth of the subject with a practical approach.
So, when you head to the scenario where you no longer deal with the practice capital but invest the real money you can be sure about your approach. For instance, professional traders such as Dr. Ernest Chan are a part of faculty for courses like EPAT.
You have realistic expectations from algorithmic trading
Having realistic expectations is also an extremely important point here. For instance, before you pick up algorithmic trading, your expectations should not be unrealistic such as “algorithmic trading will not require timely human intervention”.
Such unrealistic expectations can wreak havoc and if you have a more realistic approach to algorithmic trading, then you must eliminate the fear and step into it.
You are using risk management skills in algorithmic trading
With risk management skills in algorithmic trading, you must eliminate any fear of using this contemporary approach since your trades will be much safer.
In case you have equipped yourself with risk management skills, then you get one of the reasons why algorithmic trading is a safe and more effective approach for you than manual trading.
For instance, risk management practices such as stop-loss can help evade any possible loss due to market fluctuations. If you do not want to trade beyond a particular value, stop loss helps you to exit the trade when the value of the stock reaches a particular figure that you have set.
In your decision making with regard to picking up algorithmic trading, there might be several fearful thoughts stopping you from going forward. Irrespective of the experience, background or any other “so-called hurdle”, it is very much possible to pick algorithmic trading.
All you need is dedication, time and effort to put into the learning process as well as a practical approach.
If you just wish to build a foundation in Algorithmic Trading or want to get a complete picture of the domain, the short self-study course by Quantra about how to get started with algorithmic trading is just what you'll appreciate. Just dedicate 3 hours and gain skills for a lifetime. Enroll now!
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