Algorithmic Trading

Dictionary Says

Definition of 'Algorithmic Trading'

A trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock's price. Large blocks of shares are usually purchased by dividing the large share block into smaller lots and allowing the complex algorithms to decide when the smaller blocks are to be purchased.
Investopedia Says

Investopedia explains 'Algorithmic Trading'

The use of algorithmic trading is most commonly used by large institutional investors due to the large amount of shares they purchase everyday. Complex algorithms allow these investors to obtain the best possible price without significantly affecting the stock's price and increasing purchasing costs.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Institutional Investor

    A non-bank ...
  2. Block Trade

    An order or ...
  3. Iceberg Order

    A large single ...
  4. Mutual Fund

    An investment ...
  5. Lot

    In general, any ...
  6. Neural Network

    A series of ...
  7. Fuzzy Logic

    A mathematical ...
  8. Algorithm

    A set of rules ...
  9. Quantitative Trading

    Trading ...
  10. Boom

    A period of time ...

Articles Of Interest

  1. Trading Systems Coding: System Design

    If you design and code your trading system carefully, you can avoid trading errors.
  2. The Global Electronic Stock Market

    The way trading is conducted is changing rapidly as exchanges turn toward automation.
  3. Moving Average Explosions

    Find out how you can profit from this short squeeze strategy.
  4. Using Genetic Algorithms To Forecast Financial Markets

    Genetic algorithms are unique ways to solve complex problems by harnessing the power of nature.
  5. Electronic Trading Tutorial

    Learn about the systems that run the market. Topics include market makers, specialists, SuperDOT, ECNs, SOES, Level I, II, and III Access, and more.
  6. The Nitty-Gritty Of Executing A Trade

    Ever wonder what happens behind the scenes when you buy or sell a stock? Read on and find out!
  7. Neural Networks: Forecasting Profits

    Take a look at the algorithmic approach to technical trading - you may never go back!
  8. Should You Invest Your Entire Portfolio In Stocks?

    It is true that stocks outperform bonds and cash in the long run, but that statistic doesn't tell the whole story.
  9. The Uses And Limits Of Volatility

    Check out how the assumptions of theoretical risk models compare to actual market performance.
  10. Risk Tolerance Only Tells Half The Story

    Just because you're willing to accept a risk, doesn't mean you always should.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center