Algorithmic Trading

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Algorithmic Trading is a system of executing trades automatically based on advanced mathematical models and formulas that are pre-defined, as opposed to a person manually executing the trade. It is also commonly known as automated trading, black-box trading or algo trading for short. An algorithmic trading model is built with strict mathematical rules and variables that may include timing, price or quantity and are often built to initiate orders with no human intervention. The idea is for the algorithmic model to spot optimal entry and exit points for a trade, and to execute these without delay based on the predetermined rules. In some forms of Algorithmic trading, such as High Frequency Trading, trades are executed and closed so quickly and in such volumes that the model could not be carried out by human hands manually. Computers can carry out a trade in a split second that would take a human much longer to analyse and prepare for manually.

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