Algorithmic trading pre-programs and automates trading instructions based on variables, such as price, timing, and volume.
An algorithm includes complex formulas, mathematical models, and human oversight for better decisions to buy or sell underlying assets.
The applications of algorithmic trading are various – order execution, arbitrage, and trend trading strategies.
Algorithmic trading takes advantage of high-frequency trading technology. So, traders can process tens of thousands of trades per second. And it partly explains why institutional investors and large trading firms love using it.
- Cost reduction: A batch of trades can be processed without much manpower as manual trading.
- Acceleration of trading process: Automated trades cuts down on the time to execute an order.
- Timely reaction to volatile price actions: No more being glued to monitoring screens, yet you can lean on algorithmic trading to do hard work.
Algorithmic traders do not work in a robotic system. Yet, algorithmic trading is a clever combination between human oversights and insights into the market cycles.
So, if you can master algorithmic trades, your trading career will be at the next level. Less time and effort for trade execution and management, yet you can gain more profits!