Back in the day, trading was a far more challenging game. Investors who were going to be successful really needed to be able to spot patterns in record time. It follows that it took either great experience or tremendous genius (or you had to be a stock broker with a complete lack of scruples like in the Wolf of Wall Street) to get anywhere. Fortunately, times have changed. The fact that trading has gone online means that investors can keep a constant eye on the stock markets and trade directly with the use of trading platforms and trading apps. This has the additional benefit of eliminating middle-men and the possibility of the investor getting duped. But more importantly, technology has given the average investor a whole world of tools and support systems to help him navigate the stock market. Investors can seriously up their trading game by making use of rule-based trading which uses automation and algorithms to spot patterns and make future predictions.
Even as recently as seven to ten years ago, stock traders would be strapped down to several computer screens during all hours of the day. They would be harried, their heads and minds spinning in a zillion different directions, trying to spot patterns and make the right predictions. Now it is even possible for you to hold a full-time job that keeps you really busy while still dabbling in trading. Rule-based trading uses algorithms to throw up prompts and alerts based on market patterns that have shown up repeatedly in the past. These are the same patterns that traders traditionally watched out for on their terminals. The difference is that now, computers have been primed (by rule-based trading programs) to spot these patterns instead. This sort of opens up trading as an investment option to the whole market.
Removal of bias and sentiment
Greed and fear are the biggest contributors to loss on the stock market. Greed prompts traders to stay in the game longer than they should, prompted by thoughts that might sound like “but the price of my stock is rising so rapidly; I should sell a little later when the price is even higher”. The trader might however find that he lost out on the highest point because thereafter the stock price dropped. Or worse, the price might drop so drastically that he has to sell at a loss. Similarly, a trader might pull out of a trade as soon as the stock price drops even very marginally, for fear that the stock price plummeting, resulting in a loss of capital. This might result in him missing out on the price upswing. Even after reading all the tips and tricks of strategic trading, investors are human and therefore prone to acting emotionally especially when looking at a rapidly fluctuating stock graph. The worst is when someone has a ‘strong feeling’ that some trade is going to be absolutely amazing even though they cannot explain why. Gut feelings have no place in the stock market but investors are human and will naturally display these traits when making trading decisions (although it is strongly advised against).
It can all be very overwhelming. Rule-based trading prompts traders on when to enter and exit trades. As mentioned earlier these prompts are fully automated and linked to patterns that the stock market has displayed in the past.
Linked to the above two points, rule-based trading offers a one-touch route to trading. Not only do you not need to devote your whole life to the stock market; not only is there a safer way to trade that eliminates human error, but it is also quick and easy. Angel One’s ARQ Prime is an example of a rule-based trading tool. With ARQ Prime, users receive the option of ready-to-execute trades. Investors simply need to click on a strategy that floats their boat and then tap to have trades suggested under that strategy go live.
If you are in your 30s you might remember the days when you had a little phone diary with your friends’ names and birthdays written down in alphabetical order. It became quite a challenge to remember birthdays to be honest because well you’d really need to go through the whole book every single day if you were to remember everyone’s birthdays. So people remembered vaguely when someone’s birthday was and then checked their entry around the approximate month. But today Facebook gives you reminders on people’s birthdays and even suggestions to greet them. An algorithm is in play here too. This anecdote (or walk down memory lane) should give you an idea of how rule-based trading has changed the game in the investor’s favour.
Democratising the trading landscape with DIY
Investors who want to develop their own trading strategies, traders who want to become stock brokers, brokers who want to go online and get hold of an audience – your moment is finally here. Smart API is a tool by Angel One that lets you develop your own rules for rule-based trading. This might appeal to mature, veteran investors (or young geniuses) who would rather trust their own knowledge. Traders who want to become stock brokers can also use API to get their own trading platform up and running without going through the tedious process of becoming a stock broker. Angel One is also extending its customer base to its SmartAPI users who want to become trading platforms.
This overall democratising of any landscape is healthy because it brings more players into the game and thereby increases knowledge and awareness. And of course, in the stock market more players means more buying and selling, more activity, more fluctuation and more room for growth.
If you are tech-savvy, ARQ Prime and Smart API are here to make trading more accessible, easier and more fool-proof for you. EveryoneCanInvest no matter what their age, gender or occupation is. The Angel One App – available for download free of cost, and tools such as these are aimed at putting the controls into the hands of the investor. Do your bit of learning and research by reading blog posts such as this one – you are already well on your way to becoming a smart and savvy investor. Work with Angel One to get your investment journey off the ground. Watch quick three minute videos that detail simple, complex and very complex investment terminology (or if you prefer, get that dose of data in the form of a podcast). And of course, enjoy on-the-go access to the stock market – along with live updates on your trades – with the Angel One App.