How Algorithmic Trading can significantly improve your investing
Inspiring new investors one day at a time
Algorithmic trading is often misunderstood by the average person. When most people hear the term “algorithmic trading,” they either have no idea what it means or assume it’s synonymous with risky day trading strategies. However, algorithmic trading simply refers to using algorithms to execute trades, and it can be a powerful tool for synthesizing effective long-term investing strategies.
Let’s consider an example. Suppose you strongly believe in the AI revolution and want to invest heavily in companies poised for significant growth in this space. With traditional investing, finding stocks that meet your criteria would be extremely difficult and prone to subjective bias, especially if your approach is based on reading articles and watching videos.
Algorithmic trading offers a way to filter through vast amounts of company data and synthesize effective long-term investing strategies. Here’s how a modern algorithmic trading platform can help you create such strategies.
Investing in the Artificial Intelligence Revolution
Finding New AI Stock Ideas
An algorithmic trading platform allows you to quickly find novel AI stocks. With a single click, you can access a comprehensive list of artificial intelligence stocks sorted by metrics such as market cap, volume, revenue, or free cash flow. This streamlines the process of identifying promising AI investment opportunities.
Finding Inspiration From Existing Ideas
In addition to sifting through stocks, algorithmic trading enables you to discover long-term investing strategies created by others. This is known as copy trading, and it’s an effective way for new investors to generate ideas. For example, you might come across a portfolio focused on investing in profitable AI stocks that has outperformed the market, with higher Sharpe and Sortino ratios.
The screenshot above shows an example of such a portfolio. It offers a first step for people who are intimidated by the complexity of algorithmic trading and shows that its really not that complicated.
A user can then add these strategies to their portfolio, update the stocks and strategies in the portfolio, and then deploy it live for real-time paper-trading.
However, it’s crucial to remember that past performance does not guarantee future results. Backtested strategies, while informative, are subject to biases like overfitting and lookahead bias. As an investor, it’s essential to conduct your own due diligence and understand the underlying logic and risks of any strategy you’re considering. Use copy trading as a starting point for ideas, but always adapt and personalize strategies to align with your own investment goals, risk tolerance, and thorough research.
Conclusion
Algorithmic trading is a powerful tool that goes far beyond the realm of risky day trading. By leveraging algorithms to analyze vast amounts of data and execute trades, investors can develop effective long-term strategies tailored to their beliefs and goals. Whether you’re passionate about the AI revolution or any other sector, algorithmic trading platforms offer a streamlined way to find promising stocks and draw inspiration from successful strategies. As you begin your investing journey, consider harnessing the power of algorithmic trading to make more informed, data-driven decisions and potentially improve your long-term returns.
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