What is algorithmic trading and what is it used for

What is Algorithmic Trading and What is it Used for?

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In recent years, the financial world has begun to talk about a discipline known as “algorithmic trading”. Although the name itself makes it clear what it is related to, the truth is that not many people know exactly what this innovative activity is.

What is algorithmic trading?

As has happened throughout history with many industries, in finance, thanks to the advance of technology, it has been possible to automate processes and optimise activities so that they are carried out in a more efficient and effective way, so that the human worker can focus on other tasks.

Part of this evolution is due to the famous algorithmic trading. As the name suggests, this is trading based on computer algorithms. While this does not mean that it is an automated process, many developers are aiming for it to become so, sooner or later.

What algorithmic trading is for

Algorithmic trading can have many uses. Some traders and/or developers are responsible for programming an algorithm so that, based on technical triggers that provide the behaviour of supply and demand, buy or sell a particular asset, aiming to make a profit from the difference.

On the other hand, bots are also often used to analyse historical financial ratios and reach a conclusion that will allow the manual construction of a large-scale investment strategy.

Algorithmic trading, in turn, encompasses all kinds of general software development that help to enhance financial and stock market trading.

As can be seen, this activity is very complete and serves to perform numerous tasks, but always keeping in mind the objective of optimising financial processes through the creation of a computer programme.

 

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