That has all changed.
Today, there are automated trading bots, or algos (short for algorithm), everywhere. It began with algos trading VWAP (volume weighted average price) orders. With the advent of day trading automation inevitably followed and today you can find specialized trading bots on the internet and even floor brokers are now using algos (see report). There are even some blogs, such as Skill Analytics and Zen Trader to name a few, devoted to this topic.
Flying on autopilot is not always a good thing
With so much automation around, some “reality check” questions come to mind:
- Is anyone doing a reality check on these algorithms?
- Can someone game these algos?
If you must use algos and go on autopilot, do it intelligently. As I wrote in a previous post:
Mrs. Humble Student of the Markets, who is a pilot, calls it “raising your head up from the instrument panel and looking out the cockpit window once in a while”.