Everything You Should Know About Algorithmic Trading
Algorithmic trading (also known as black-box trading, automated trading, or algo trading) uses a computer program which follows a specific set of instructions (an algorithm) for trading. The trade, in theory, generates profits at speed & frequency, which is impossible for a human trader.
The defined set of instructions is based on time, price, quantity, or any mathematical model. Apart from the profit opportunities for traders, algo trading renders markets more liquid & trading more systematic by ruling out the impact of human emotions on the trading activities.
Types of Algorithmic Trading Strategies
Any algorithmic trading strategies require an identified opportunity which is profitable in terms of improved earnings or cost reduction. The following are the common trading strategies that are used in algo-trading:
Momentum/Trend Following
This type of algorithm seeks to find a...