Algo trading making markets less attractive.

[mananbparekh]

Is algo trading going to reduce volatality by eliminating the emotion element in markets.
If algorithms and softwares know what is a fare price will that not lead to a lack of price growth and make trading as well as investing less attractive.
Your views @nithin Sir.
Thank you.

[nithin]

@mananbparekh

Is algo trading going to reduce volatality by eliminating the emotion element in markets.
If algorithms and softwares know what is a fare price will that not lead to a lack of price growth and make trading as well as investing less attractive.
Your views @nithin Sir.

An algo is a program written by a human. So it can essentially only do what the human writing the program wants it to do. This human now also can turn on or off the program anytime, make changes to it anytime, so it can be unemotional only if the human behind it is unemotional and not making changes. So if a person without algo can’t trade unemotionally, it doesn’t mean that with an algo he suddenly will somehow be able to do so. No, I don’t think investing will become less attractive with algo.

But there are certain types of trades (for example cash future arbitrage) where speed of execution is important, on such trades programs will beat humans anytime. But most retail traders don’t do such trades, so no one is really competing with an algo.