About Algorithms

Algorithmic trading (automated trading, black-box trading, or simply algo-trading) is the process of using computers programmed to follow a defined set of instructions for placing a trade in order to generate profits at a speed and frequency that is impossible for human traders.

The defined sets of rules are based on timing, price, quantity or any mathematical model. Apart from profit opportunities for the trader, algo-trading makes markets more liquid and makes trading more systematic by ruling out emotional human impacts on trading.

The greatest portion of present day algo-trading is high frequency trading (HFT), which attempts to capitalize on placing a large number of orders at very fast speeds across multiple markets and multiple decision parameters, based on pre-programmed instructions.

High-frequency trading (HFT) firms represent 2% of the trading firms, but account for 73% of all trading volume. HFT has been a subject of public focus since the U.S. Securities and Exchange Commission stated that HFT contributed to volatility in the 2010 Flash Crash.