The history of algorithmic trading
Algorithmic trading appeared in the early 80s of the XX century. These times were the complexity of trading for an ordinary trader because at that time only a few institutional investors with huge intellectual resources could afford such power. Today the situation has changed radically and this type of trading is available to everyone, due to modern technologies and powerful computers. But do not forget that algorithmic trading will give the maximum effect in the case when you also have an effective strategy.
Algo-trading is the most stable way to make income in the markets. It can be easily predicted with a high probability relying on the dynamics of development in the past period. The time of a transaction can vary from 1 minute to several weeks, but as a rule, the average transaction time takes few hours.
Key funds in the market
There are more than 15,000 hedge funds in the world, with summary transactions of over $3 trillion in assets. Unlike other financial institutions, they do not attract widespread attention and not everyone can become an investor because the entry threshold begins from $500,000 and above. The name of hedge funds was assigned to companies because of the desire to extract the maximum profit with the lowest possible level of risk.
Below we will take a look at the top 5 largest hedge funds in the world and the volume of their assets.
TOP 5 hedge funds:
- Bridgewater Associates (138 billion dollars);
- Renaissance Technologies (130 billion dollars);
- Man Group (105 billion dollars);
- AQR Capital Management (143 billion dollars);
- Two Sigma Investments (58 billion dollars).
The rating is based on data from Pensions & Investments and ADV Ratings.
Types of asset management
The main types of asset management are:
- Portfolio – a type of asset management, where financial instruments are traded in a certain period of time fund or trader;
- Prop-trading – differs from other types of asset management because it works only with equity capital, i.e. without attracting funds from investors;
- Long-short – literally “long” and “short” transactions, in the first case, trading is aimed at buying, and in the second – for selling;
- Hedge trading – a feature of this type of trading is risk minimization. For example, through insurance or diversification of actives and deals;
- Algo-trading is a type of trading that automates market manipulations and minimizes risk by eliminating the human factor (emotions, speed, panic sell, tiredness, etc.).
Any automatic system can easily surpass the human factor, which significantly increases the chances of success and is a source of stable income in trading.
The algorithmic trading of cryptocurrencies attracts more and more attention in the 21st century. But also, it and has some important advantages and disadvantages.
Pros and cons of cryptocurrency asset Algo-trading
Algo trading of cryptocurrencies means the complete elimination of the trader from the trading process, which allows you to get some of the following advantages over other analogs:
- Lack of emotion and lack of consistency. The human factor is manifested by a surge of emotions, excitement, and lack of consistency, which, as a rule, lead to a loss of funds;
- Round-the-clock work – 24/7. A trader cannot trade all over time, and in algorithmic trading of cryptocurrencies, situations often arise that bring good profits. So, many traders simply miss this opportunity, unlike a robotic system;
- Lack of experience. Even a beginner can start trading using an automated system, he does not need the experience to delve into all the deep nuances of trading;
- Speed and precision. One of the most important advantages remains the factor of the accuracy of calculations and the speed of the transaction because the situation can quickly change. And not always in favor of the trader.
Of course, even the most ideal system has disadvantages:
- First, it’s really difficult to find a reliable trading robot. Only 10-15% of all programs, which are available in the Internet, are good. The remaining 85-90% are either fraudulent or already inoperative;
- Secondly, a working algorithm cannot change to another, and if any changes occur, it continues to work according to the old strategy;
· Thirdly, the bot can miss some profitable deals. This is due to the automated strategy of work, from which the working algorithm cannot deviate.
Algo-trading is an effective solution for cryptocurrency trading
Despite some disadvantages, cryptocurrency algorithmic trading remains one of the most effective ways of earning money. Often, you can get the most out of the market and reduce the burden on the trader when opening a very large position only with its help. The robotic trading system is based on algorithms with a clear strategy that deprives all the hopes of traditional market participants and leads to an abandonment of standard manual trading.
How to start trading with algorithmic trading
For those who are just start trading or prefer trading with robots, FOBS Asset Management offers an open application programming interface (API). FOBS Asset Management successfully makes deals in the market for managing digital assets (cryptocurrencies) based on the experience of our team (which is more than 20 years). The company’s services allow you to diversify assets and reduce risks, achieve maximum profit, and close the deal on time. And all of it without transferring your funds.
Cooperation with the company makes it possible to invest not in one asset and strategy but provides an opportunity to use the entire pool of instruments – there are about 15 of them in the portfolio, and each instrument has 15 strategies.
Each account has a special “Risk Manager”. This is a service that, in case of unforeseen situations, will not allow the bot to lose the deposit, and such situations can occur quite often. And it is worth remembering one important detail that without deep market analysis, it is very easy to start trading illiquid assets and incur losses, and the best strategy is only 20% success. Do not reject the help of real specialists – FOBS Asset Management is a panacea for protecting and increasing your assets in the world of cryptocurrencies.