Definition
Algorithmic trading uses computer programs to follow defined rules for placing trades. Algorithms can execute based on timing, price, quantity, or mathematical models. Benefits include removing emotional decisions, faster execution, and ability to backtest strategies. It ranges from simple rule-based systems to complex machine learning models.
Example
An algorithm automatically buys when the 50-day MA crosses above the 200-day MA and sells on the reverse crossover.
FAQ
What is Algorithmic Trading?
Using computer programs to automatically execute trading strategies.
Why is Algorithmic Trading important?
Algorithmic Trading helps investors evaluate trading strategies and make more informed decisions.