Why do we need to automate trading?

Historically, human traders implemented such rule-based trading to manually enter orders, take positions, and make profits or losses through the day. Over time, with advances in technology, they've moved from yelling in the pits to get orders executed with other pit traders, to calling up a broker and entering orders over the telephone, to having GUI applications that allow entering orders through point and click interfaces.

Such manual approaches have a lot of drawbacks – humans are slow to react to markets so they miss information or are slow to react to new information, they can't scale well or focus on multiple things at a time, humans are prone to making mistakes, they get distracted, and they feel a fear of losing money and a joy of making money. All of these drawbacks cause them to deviate from a planned trading strategy, severely limiting the profitability of the trading strategy.

Computers are extremely good at rule-based repetitive tasks. When designed and programmed correctly, they can execute instructions and algorithms extremely quickly, and can be scaled and deployed across a lot of instruments seamlessly. They are extremely fast at reacting to market data, and they don't get distracted or make mistakes (unless they were programmed incorrectly, which is a software bug and not a drawback of computers themselves). They don't have emotions, so don't deviate from what they are programmed to do. All of these advantages make computerized automated trading systems extremely profitable when done right, which is where algorithmic trading starts.

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