What Is Algorithmic Trading

Algoritmic trading is process for executing orders utilizing pre-programming trading instructions to trading accounts for variables such as price, timing and volume. Algorithmic trading(automated trading, black trading, or simply algo trading) An algorithm is a set of directions on solving a problem. Computer algorithms send small portions of the full orders to the market over time.

Algo trading makes use of complex formulas, mathematical modules and human oversight, to make decisions to buy and sell financial securities over an exchange. Algorithmic traders also make use of high-frequencies trading technologies which could make firms to do a tens of thousands of trades per second.

Points to Take Away

• Algorithmic trading use process and rule based instruction to execute trades.

• It has grown significantly since 1980s

• provides a tens of thousands, such as faster execution and reduced cost can also exacrebrate the market's negative stretegeties.

  

  Advantages and Disadvantages

  Advantages:

  • Less human interventions

  • Increased market volumes

  • improved order entry and exit speed

  • Ability to Backtest

  Disadvantages

  • Lack of Human Control

  • Short life span of Algorithms

  • Need for constant monitoring

  • Need to know about the development and coding for the algorithms