review Chapter 8 of the HIll textbook, particularly sections headed Types of Orders, Equity Trading Venues,...

review Chapter 8 of the HIll textbook, particularly sections headed Types of Orders, Equity Trading Venues, Fintech in Equities and Robo-advisors, and the Economist article, March of the Machines. The subject of robot or algorithmic trading is controversial. According to analysis a survey was undertaken by Refinitiv: “Upgrading your execution management system to gain access to advanced analytics and the latest algorithmic trading tools, for example, could show a return on investment in only a few weeks.” What are your thoughts on the implications, positive and negative, of computer-generated trades taking over from humans in investment and trading decision-making? Bring another source to support your argument.

Your original post should be 200-300 words, or 4-6 paragraphs long

Expert Solution

The lastest evolution in trading is method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading was developed to make use of the speed and data processing advantages that computers have over human trader. This type of trading using artifical intelligence is called as algo trading. It is widely used by investment bankers, pension funds, mutual funds, and hedge funds that may need to spread out the execution of a larger order or perform trades too fast for human traders to react to. The major advantage of this trading can be summed as follows:

Accuracy
Time saving
No human error.
Systemmatic approach.
More analytical approach.
No human element involved, human tend to get powered by instinct which makes the trading less skcptical.

The term algorithmic trading is often used similar with automated trading system. These encompass trading strategies such as black box trading and quantitative trading, these technologies provide for extremely high speed trading and involves quick decision making unlike the manual trading options where human tend to take time to make decisions.Such systems run strategies including market making, inter-market spreading, arbitrage, or pure speculation.

There are several reasons why algorithmic trading is better than manual trading. It performs the complex calculations, it does not miss out on trading opportunities, and it faces no emotional conflicts that arise when an individual is making trading decision.

There are various arguments in favour of algo trading stating it to be more profitable. If investment is a process, then automation is a logical conclusion. Algo trading can be reffered as like a driverless car. It can go fast or slow. It all depends on the robustness of the design. The design here refers to be required rate of return by investor.

jeff jeffy answered 3 years ago

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