Glossary: What is Algorithmic Trading?

This trading method relies on algorithms—sets of instructions designed to automate the decision-making process. It eliminates emotions from trading and enables consistent strategy application, even under volatile conditions. Financial institutions use it to gain a competitive edge through rapid and precise execution.

Practical Example of Algorithmic Trading

Consider a scenario where an algorithm buys shares of a company when their price falls below a set threshold and sells them once a target profit margin is achieved. Another example is high-frequency trading (HFT), where thousands of small trades are made within milliseconds, leveraging minimal price differences for substantial aggregate gains.