Auto-trading removes the ever present human element from stock trading. Whereas a human may take 5mins to execute a single trade, an auto-trading program will execute a buy/sell order in milliseconds. This lightening quick ability to trade allows the platform to take advantage of what are known as flash crashes. A flash crash occurs in the market whenever an index rapidly fluctuates in price; these rapid fluctuations often occur faster than we can keep up and reap the benefits. When they occur on a lingering and massive scale, affecting the market as a whole, we experience a widespread panic and rush to either buy or sell securities. This rush causes a clog of orders within the infrastructure of the markets and those who are last in line often get the short end of the stick – their buy orders are executed when prices are too high, and their sell orders are executed when prices are too low. Computers don’t have this problem. Traders who implement an auto-trading strategy have already preset their preferences for buy and sell prices, therefor the very second these thresholds are hit the orders are executed, no calling, no waiting, no lagging internet connection, just speed-of-light buying and selling.
Last week we witnessed a flash crash and the rippling worldwide catastrophe of the aftermath. China’s market fell 7% within the first 30mins of trading after the People’s Bank of China decided to devalue the Yuan. This plummet in prices triggered the circuit breakers in place and shut down all trading for the day; money stood at a stand-still. Meanwhile, in Europe and America the effects were felt as markets fell and shed points like a husky in the heat of summer. Investors pulled money out of securities and went for traditional safe havens such as gold and 10-yr treasury bonds. A single governmental decision in combination with a programming oversight caused a massive 30min fluctuation; the herd started running and the computers said stop – they shut it all down. The waves rippled worldwide and the effects were seen within the global economy; in the wake of this occurrence US indexes fell as traders scrambled to move their money. Everyone was panicked.
Everyone except me.
My son called me up to ask about the state of my portfolio after the events in China. I took a quick look and was pleased to see that my tried and true methods of sticking to the fundamentals in selecting quality companies, in conjunction with a strong auto-trading platform, had shielded me and my clientele from the world’s trauma. My stock was strong, and my choices were solid, my orders were executed while everyone else was logging on and dialing phones – instantly.
That’s the power in my platform, but the heart and soul remains in the fundamentals of the companies I work day and night to research and hand-pick. By following the 3 laws of wealth and reading my blog.