What is algorithmic trading?

There are almost as many business strategies on financial markets as investors and traders. Markets are becoming more and more accessible electronically and open even more options for the development of business systems. One of them is the Algorithmic Trading, a trading system that uses advanced mathematical models called algorithms for decision -making and transactions on financial markets. The computer, programmed with an algorithm, shall place electronic business orders when certain technical conditions are met. These conditions may include timing, price, quantity of order and general market trends, among other things. This is because the benefits it represents is the most important for large funds. For example, if the fund buys a large amount of a given shares, this may result in an increase in the price of thece enough to negatively affect the profit range that the fund hoped. However, with algorithmic trading is a simple division of one large trade into several smaller shops to reduce toPad on the market.

Institutional investors have another advantage of speed with which automated algorithmic business programs can decide. If market information is accepted electronically, trading decision -making is accepted automatically, often without the need for any human intervention. The decisions are taken and orders are initiated before people even realize about information. This is part of the great competitive advantage that hedge funds and similar traders may have over individual investors.

business algorithms themselves have a much longer history than algorithmic trading. The algorithm simply refers to the sequence of steps to recognize the market pattern in real time to detect business opportunities. Historically, investment companies would employ a large number of individual merchants to manually implement the process of building business algorithms. With advanced technologies isHowever, now there is a much faster process of creating business algorithms and their use and many fewer workers are required. Algorithmic trading has effectively replaced many staff previously needed by investment companies.

However, traders are still necessary to use algorithmic trading. In many cases, the trader will monitor the data of many algorithms at the same time on the digital dashboard, so the trader will be much more productive. The work of traders and analysts is also still necessary to design new algorithms and optimize the existing.