What is algorithmic trading?

5 maart 2020

This is a short explanation of how Mirror Trading International’s robotic trading/EA works.

Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume. This type of trading was developed to make use of the speed and data processing advantages that computers have over human traders. Popular “algos” include Percentage of Volume, Pegged, VWAP, TWAP, Implementation shortfall, Target close. In the twenty-first century, algorithmic trading has been gaining traction with both retail and institutional traders.

It is widely used by investment banks, pension funds, mutual funds, and hedge funds that may need to spread out the execution of a larger order or perform trades too fast for human traders to react to. A study in 2016 showed that over 80% of trading in the FOREX market was performed by trading algorithms rather than humans.

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