Does Algorithmic Trading Work?

With a staggering 70% of all trades being conducted via some sort of algorithmic platform in the modern market, a common question that new investors might commonly ask is, “Does algorithmic trading work?”

Indeed, algorithmic trading routinely outperforms both popular index funds like the S&P 500, Dow Jones, and Nasdaq, as well as traditional investing, as outlined in the table below.

Algorithmic vs. Traditional: The Breakdown

 Algorithmic TradingTraditional Investing
DefinitionUtilizing artificial intelligence (AI) to craft and execute investment strategies. Relying on individual experience and knowledge to craft and execute investing strategies.
ExpenseMonthly fees of varying amounts depending on the quality of the platform.Flat fees paid per individual trade via brokerage houses.
Average Returns (%)6-13%5-10%

Today we will break down the chart above to demonstrate why algorithmic trading routinely outperforms traditional investing, highlighting its advantages and disadvantages.

Algorithmic Trading Advantages

While investing isn’t necessarily reserved for the ultra-wealthy, those with significantly more capital do have access to financial advising services that firstly limit their losses and help them take advantage of opportunities that come with a bear market. For the most part, most investors are:

    • Those with spare money to invest.
    • Those who were educated in the world of investing
    • Those who could afford experienced financial advisors.

For years, only these groups could afford the risks involved with investing. However, algorithmic platforms have flipped this paradigm on its head in recent years by providing the public with the ability to craft investment strategies despite not having these resources.

On a more practical level, however, algorithmic platforms offer users several more actionable benefits, including:

Superior Market Knowledge

Algorithmic trading engines are created through machine learning, during which they consume and process decades of market data in order to recognize patterns in it. Because of this process, algorithmic engines are far better predictors of market behavior than traditional investors.


The primary advantage of an algorithmic trading platform is its ease of use. Whereas traditional investing requires a great deal of prior knowledge and experience to conduct trades, algorithmic platforms provide investors with a user-friendly interface that simplifies the complex process of trading.

Unlimited Endurance and Unbiased Execution

Traditional investors are, well, human. They need to sleep, eat, and take breaks. Algorithmic platforms have none of these needs, meaning they can monitor markets relentlessly to identify potential threats and opportunities. When these patterns are identified, algorithmic platforms can act on them mechanically, as they do not suffer from the personal attachment to their investments that traditional investors do.

Algorithmic Trading Disadvantages

Poor Investor Knowledge

While many algorithmic platforms claim to offer investors options tailored to their risk preferences, the reality is that these efforts typically take the form of a limited survey. Of course, this makes a couple of assumptions about the investors taking such a survey:

    • They have a working knowledge of investing concepts like risk, strategy, and returns.
    • They have a similar amount of capital going into their investment journey.

The reality is that no survey, regardless of length or depth, can provide a complete understanding of an investor’s circumstances. The best option in these situations is to meet with an experienced financial advisor to provide nuanced advice on your investment plans. These services, however, are rarely offered through a standard robo-advisor.

Limited Strategy Options

Because they often deal with inexperienced advisors who are less familiar with investing concepts, specifically investing risk, algorithmic platforms often focus their data on low-risk investment strategies like index funds or ETFs. While this does a great deal to mitigate losses on your portfolio, it is likely to be unsatisfactory for investors seeking larger returns or those working with a shorter time horizon.

Uneven Platform Capabilities

No two algorithmic platforms are created equal—algorithmic platforms are divided between lower-performance robo-traders and high-level algorithmic platforms like quantitative hedge funds or hybrid platforms. Within these circles, too, there can be a wide disparity between individual platforms offering a variety of features and options. As a result, choosing the right platform for your needs can be something of a trial in and of itself.

The Best Fit for You

Often, picking the right algorithmic platform depends on understanding your goals as an investor. Indeed, there are several different types of investors, each of which have their own preferences that make them better suited to one platform over another.

Types of Investors and Common Strategies

InvestorTime HorizonRisk PreferencePlatform
College GraduateLongLowRobo-Advisor/Hybrid Platform
Young ProfessionalLongLow/MediumHybrid Platform
High Net-Worth IndividualLong/ShortMedium/HighQuantitative Hedge Fund
Recent RetireeShort Low Robo-Advisor

While this table serves as a general suggestion, there is no survey properly suited to understand the nuances of anyone’s financial situation. Ideally, investors should consult with a financial advisor to make the best possible decision.

Does Algorithmic Trading Work For You?

To summarize, algorithmic trading absolutely works, but it could work better depending on who you are working with. Because of the disparity that exists between algorithmic trading platforms, choosing the best one for your needs is crucial. Unfortunately, most algorithmic platforms do not provide investors, particularly new investors already struggling with the unfamiliarity of investing, with an in-person consultation to make this decision responsibly.

For that reason, the best first recourse for these investors is to find a platform that does. In many cases, hybrid platforms like RIMAR Capital offer investors the best of both worlds by providing them with high-quality AI combined with human consultants to tailor investment strategies to fit their particular circumstances. Best of all, our fee structure is entirely performance-based, meaning we don’t make any money unless you do.

So, if you are looking to harness the power of AI investing with the peace of mind that there is an investment advisor by your side, Rimar is the perfect fit.

Getting Started With Rimar

RIMAR Capital makes artificial intelligence-based investing broadly accessible to everyday investors who don’t fit the profile of a typical hedge fund client. With RIMAR, investors have the choice of several different trading strategies, all of which are backed by some of the industry’s leading experts. What’s more, RIMAR investors don’t need millions in assets to invest, nor are they subject to a battery of fees and prohibitions on when and how they can access their own money. So if you’re ready to pick up returns that are only possible with data-driven mastery of the market, RIMAR Capital is right up your alley.

So does algorithmic trading work? With Rimar, it does. Contact us today to see how RIMAR Capital can help grow your portfolio’s value with hedge fund-like returns earned using its AI-driven investing strategies and skilled quantitative trading staff.

Ryan Gordon

Ryan Gordon

Ryan is a qualified chartered accountant of South Africa. Ryan is an avid sportsman who also enjoys reading and spending time with friends and family in his down time. Ryan joined the RIMAR Capital team in 2019 as a business development manager.

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