Real-Life Examples of Algo Trading

Let’s say you’re watching a cricket match, and during a tense over, you get a signal to buy a stock based on your strategy. But you're distracted — by the time you open the app, check the chart, and place the trade, the price has already moved.

Now imagine if an algo was doing this instantly, for you, without even blinking. That’s the power of automation.

To help you understand better, let’s take a few everyday trading situations and see how algos fit in:

Example 1: The RSI Dip

You’ve set a rule:

“If RSI goes below 30 and the price is above the 200-day moving average, buy the stock.”

Instead of manually checking this for 10 different stocks, an algo does this continuously, all day. The moment these conditions match, it places the order — instantly.

This helps in:

• Catching trades without delay
  
• Monitoring multiple stocks at once
  
• Avoiding emotional hesitation
  

Example 2: The 9:20 Breakout

Some traders follow a popular intraday strategy where they trade breakouts of the first 15-minute candle.

The rule is:

“If price breaks above the high of the 9:15–9:30 candle, buy. If it breaks below the low, sell.”

This needs sharp timing and focus. But if you build an algo for this, it can scan, act, and even manage stop-losses and targets — all in auto mode.

Example 3: The Exit Discipline

Let’s say your biggest problem is exiting too late or too early. You panic and sell on a dip, or get greedy and hold too long.

An algo can solve this by defining:

“Exit when trailing stop-loss is hit or when a certain profit percentage is reached.”

No more second-guessing. You stay consistent.

But remember…

These algos don’t “predict” the market. They simply follow your rules — like a loyal assistant. If your rules are good and tested, the algo will help. If not, it’ll still follow them — even if it means taking bad trades.

So, the real power is in the strategy, not just the code or tool.

In the next chapter, we’ll bust some common myths about algo trading — like "Only techies can do it" or "You need big money to start." Trust us, it’s more accessible than most people think. Let’s keep it simple, one step at a time.