Algorithmic trading - Financial definition
Concise definition of the term algorithmic trading
Algorithmic trading in finance refers to the use of computer programs and algorithms to execute trading strategies at high speeds and volumes, often beyond the capacity of human traders.
Comprehensive definition of the term algorithmic trading
Algorithmic trading leverages complex mathematical models and high-frequency data analysis to identify and exploit market opportunities, typically involving the automatic execution of pre-defined instructions such as timing, price, and quantity of orders. It is widely used in various market practices, including arbitrage, trend following, and market making, and is prevalent in equity, forex, and derivatives markets. Examples include statistical arbitrage strategies that identify pricing inefficiencies and high-frequency trading (HFT) which seeks to capitalize on minute price discrepancies in milliseconds.