What is Algo Trading – And Why It Matters

Imagine this — you’ve set a trading strategy that says: “Buy Nifty when RSI goes below 30 and sell when it goes above 70.” Now instead of watching charts all day and trying to act quickly every time this happens, what if a computer could do it for you—automatically, without emotions, without missing signals?

That’s algorithmic trading, or simply, algo trading.

In simple words, algo trading means using a computer program to automatically buy and sell stocks or other instruments based on a pre-decided set of rules. These rules can be as simple as a moving average crossover or as complex as a multi-indicator strategy with filters.

Let’s break it down:

• "Algo" = Algorithm = Set of rules or instructions
  
• "Trading" = Buying and selling in the markets
  
• Put them together = Trading based on automated logic
  

Why is it getting popular in India?

Earlier, algo trading was a game for big institutions, hedge funds, and full-time techies. But now, things are changing. Thanks to platforms that give API support, even retail traders in India can build and run algos without much tech know-how.

Here’s why more Indian traders are giving it a shot:

• No emotions – Algos don’t panic or get greedy. They follow rules.
  
• Speed – Computers act in milliseconds. Much faster than manual trading.
  
• Discipline – Sticks to the plan, even on a volatile day.
  
• Scalability – You can run the same strategy on multiple stocks at once.
  

Manual vs Algo Trading

So, is algo trading better than manual trading?

Not always. Algo trading is not magic. It works only if your rules are logical, tested, and market relevant. And just like any system, it needs monitoring, tweaking, and risk management.

But here’s the good news. If you're someone who believes in having a proper plan, wants to remove emotion from trading, and is okay learning something new, algo trading can be your edge.

In the next chapter, we’ll look at real-life examples of algos and how even simple strategies can be turned into powerful tools, without writing a single line of code.