Laurent Benayoun CEO of Acheron Trading wrote the following op ed.
The algorithmic trading system, or “algo trading”It has quickly established itself in the financial scene, especially within the high-paced and volatile crypto markets. Although algo trading may be perceived by some as being a niche for high-frequency, wealthy traders, it is really about automating trade strategies and creating a more unbiased, systematic approach. These strategies have found success in the crypto market, which is a perfect playground due to its high volatility, 24/7 operation and rapid growth. But misconceptions continue.
Many people mistakenly believe that algo trading and high-frequency (HFT) trading are the same thing. However, it is a much broader term. Algorithmic trading accounts for a large portion of the global market. About 60-70% percent of total trading volume On developed markets there is a growing trend towards automated trading to eliminate human errors and replace them with data-driven, logical decisions. The algorithm may follow simple rules like moving average crossovers and more sophisticated predictive models. This strategy brings precision and structure in trading decisions to a constantly changing market.
The biggest challenge algorithmic trading has is adapting to the unpredictable changes in the market and the rapidly evolving technologies. Its potential is immense: The global algorithmic market was valued around In 2023, the market is projected to grow from $17 billion to $65.2 by 2032The adoption of these technologies by both institutional and retail players is increasing steadily. Algo trading has the ability to make trades faster and more informed by data, which is why this growth shows its potential. Algo trading transforms crypto as a resilient and accessible market for traders of all kinds by dispelling these myths and addressing challenges.
Algo Trading: It’s not Just for Big Players
A common myth is that those who have deep pockets can only afford to invest in algo trading because it requires a large infrastructure. Although high-frequency traders can benefit from advanced technology, the majority of algo-based strategies can still be executed with simple tools. Today, many algorithms are not focused on speed. Instead they focus on basic functions like a dollar-cost average strategy.
It is important to dispel the notion that algorithmic trading is only for the elite. This will allow all traders to benefit from these strategies. The algorithmic trades are a major part of the crypto market, accounting for as much as 90%. Some major exchanges account for 80% of the daily volumeIt is a powerful tool to interpret and respond to real-time market changes.
In crypto, for instance, we see pronounced effects from influential voices, whether it’s an Elon Musk tweet about Dogecoin or regulatory announcements that send shockwaves across the market. Traders use Natural Language Processing (NLP), which assesses whether statements in press and on social media are positive or negative. In this way, computers can act faster than a human, and they will take positions that are in alignment with market sentiment. While these models may be extremely powerful, their use must be done with caution. “the crowd” Can sometimes magnify irrational movements in the market.
Machine learning can also be used to train algorithms that can identify patterns in the market, and then use this information to inform trading decisions. Machine learning, however, is not a new concept. “set and forget” solution. The market is dynamic and requires continual refinement.
It is clear that automated trading has distinct advantages in terms of consistency, speed and scalability. In the high-speed world of crypto, algorithms don’t wear out, can’t be influenced by emotions and are able to execute trades 24 hours a day. But manual trading has its place. This is especially true for long-term strategies and scenarios requiring flexibility or human judgment.
Algos do not always perform better than manual trading. This is a common misconception. Algo trading is best used as a complementary approach to traditional methods, which combines the effectiveness of automated systems with the experience of humans.
All traders can benefit from institutional tools
A growing number of trading tools, such as NLP or ML, are becoming more accessible. Even relatively simple strategies can now be applied with little programming expertise. For example, setting up an automated buy order for a certain asset when it reaches a preset price threshold.
The democratization of the market allows for retail traders to use tools that were previously only available to large institutions. This creates a level playing field, and enables a wider range of participants in the marketplace to compete with each other and to implement their strategies.
The algorithmic strategy must also evolve to keep pace with the market’s maturation. The algo trader must be flexible to adapt to new trends, such as meme coins. Complying with market requirements and adapting to new regulatory frameworks like MiCA, in Europe, adds complexity. Trading approaches are likely to be influenced by innovations such as decentralized exchanges and new mechanisms.
Algo Trading for a More Resistant Market
In the end, algorithmic trading helps to build a market that is more resilient, as information can be incorporated more efficiently into pricing and trade decisions are more systematic. The availability of these tools to retail users also promotes diversity in the market.
Crypto is the future of finance, and responsible trading will help to drive it.
Posted In: Featured, Opinion, Trading Author 
Laurent Benayoun
Laurent Benayoun is the CEO of Acheron Trading and an expert on algorithmic trading. He holds a Masters from Princeton University and mentors for Harvard Blockchain Incubator.
Contact Laurent @AcheronTrading via LinkedIn Editor
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