Algorithmic Trading
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Algorithmic Trading
al-guh-RITH-mik TRAY-ding
Algorithmic trading is a way of buying and selling in the market using computer programs.
These programs follow predefined rules (algorithms) to place trades automatically based on factors like price, time, and volume. Trades are executed very fast, often in milliseconds, without human intervention.
In simple terms, instead of a person deciding when to buy or sell, a computer follows a set of instructions and does it instantly.
These strategies are widely used by large investors, hedge funds, and trading firms to improve speed, reduce errors, and take advantage of small market opportunities.
For example, a trading firm may use a program to buy shares of Infosys when its 50-day moving average crosses above its 200-day moving average, and sell when the opposite happens.
The system continuously tracks live market data from exchanges like the NSE and executes trades automatically when the conditions are met. This removes delay and emotion from decision-making.
computer-based trading
electronic trading systems
high-frequency trading (HFT)
Definition
Algorithmic trading is a way of buying and selling in the market using computer programs.
These programs follow predefined rules (algorithms) to place trades automatically based on factors like price, time, and volume. Trades are executed very fast, often in milliseconds, without human intervention.
In simple terms, instead of a person deciding when to buy or sell, a computer follows a set of instructions and does it instantly.
These strategies are widely used by large investors, hedge funds, and trading firms to improve speed, reduce errors, and take advantage of small market opportunities.
Case Study
For example, a trading firm may use a program to buy shares of Infosys when its 50-day moving average crosses above its 200-day moving average, and sell when the opposite happens.
The system continuously tracks live market data from exchanges like the NSE and executes trades automatically when the conditions are met. This removes delay and emotion from decision-making.
Historical Reference
computer-based trading
electronic trading systems
high-frequency trading (HFT)
Illustration
