Algorithmic trading (also known as “algo trading”) is a modern method of market trading that employs computer software coded to execute a specific set of mathematical instructions (an algorithm) to execute one or more trades at the same time. To follow specific strategies, the formulas compute against price, timing, quantity, and other mathematical models. Algorithmic trading models execute thousands of trades to generate profits at a rate, frequency, and consistency that a human trader cannot match. Algorithmic trading technology increases market liquidity and profitability while potentially eliminating human emotion and error, which can have a negative impact on trading decisions.
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