The Top Secrets About Algo Trading Only A Handful Of People Know.
Updated: Feb 12, 2022
Algo trading, also known as algorithmic trading, is a method of trading securities (stocks, futures, options, etc.) that uses computers to execute trades based on pre-determined criteria automatically.
Algo traders use a variety of strategies, including market making, trend following, and arbitrage.
As trade volume has increased in modern markets, algo trading has become an essential part of helping banks and hedge funds get an edge over market competition. Nowadays, even many retail traders started using algo trading.
First, we'll introduce the basics behind algorithmic trading and then explore a simple example of how you can use Amibroker to build your algo trading system.
What is Algorithmic Trading?
Algorithmic trading is a simple method of executing trading orders (buy or sell) using automated pre-programmed trading instructions to send orders whenever some criteria are satisfied.
They were developed so that day traders do not need to watch a price chart continuously and subtract emotions in trading.
Popular 'algos' include Volume Weighted Average Price (VWAP), Straddle, Strangle, Iron Condor, VWLO, and more.
History of Algo Trading
The history of algorithmic trading, or algo trading, can be traced back to the early days of electronic trading. In the late 1990s, exchanges and institutional investors started using electronic order matching engines to automatically trade securities. These algorithms were simple at first, but they soon became more complex and sophisticated.
Today, algo trading is a key part of the financial markets. It accounts for a large percentage of all trades in equities, futures, and options.