Myths About Algo Trading

The moment someone hears "algo trading", most people react with:

"Oh no yaar, that’s too technical!" Or, "Isn’t that just for big institutions?"

Time to bust these myths — because the truth is, algo trading is way more accessible today, especially for Indian retail traders.

Let’s clear up the top 5 misunderstandings:

Myth 1: You need to be a coder

This is the biggest fear — people imagine algo trading means writing thousands of lines of Python code or creating complicated bots.

Reality:

Today, many tools let you build strategies with simple “if this, then that” logic — no coding needed. You just define conditions, set your rules, and the platform takes care of the rest.

Yes, coding gives more control — but it’s not a must. You can start simple and add complexity later.

Myth 2: You need a lot of capital

Another common belief is that algo trading is only for people with ₹10 lakh+ trading capital.

Reality:

You can start with nominal capital — even with small trades. Some traders begin by testing their algos with one stock or one lot in options. The key is to test small, learn fast, and scale gradually.

It’s not about how much money you put in — it’s about how smartly you manage risk.

Myth 3: Algos never lose

People think algo trading = guaranteed profits. After all, it’s a machine, right?

Reality:

Algos follow rules. If the rules are flawed, or market conditions change, algos will take losses — just like a human would.

The real advantage is consistency and emotion-free execution, not 100% accuracy.

Myth 4: Algos are set-and-forget

Another myth is that once you set an algo, you can go chill on a beach.

Reality:

Markets change. Strategies need tweaking. And live trading always needs some monitoring. Think of algos like autopilot — they help fly the plane, but the pilot (you!) still needs to keep an eye on the dashboard.

Myth 5: It's illegal or risky in India

Some traders worry that algo trading might not be allowed or is only for institutions.

Reality:

Retail algo trading is allowed in India. There are some rules and best practices, but as long as you’re using approved platforms and APIs, you’re good to go.

Final Thought:

Algo trading isn’t a secret weapon for the elite. It’s just a smarter way to apply discipline, reduce mistakes, and improve consistency in trading. The more you understand it, the more it works in your favor.

In the next module, we’ll break down how algo trading works — behind the scenes — in plain, everyday language.

Let’s keep going!