Algo trading or algorithmic trading is a process of executing orders using automated and pre-programmed trading instructions. These instructions are the outcome of sophisticated mathematical formulas.
Given that algorithms can process data in a faster and more error-free manner than humans and also eliminate emotions from trading, algo trading results in better-informed decisions with real-time data.
Further, these algorithms can work round the clock to capture every opportunity, as well as offer accuracy and speed not possible with human trading.
Most Algo-trading today is high frequency trading (HFT). A method of trading that attempts to capitalize on placing a large number of orders at rapid speeds across multiple markets and multiple decision parameters based on preprogrammed instructions.
Algo-trading is used in many forms of trading and investment activities including: