Just What Is Algorithmic Trading?

In the simplest terms, algorithmic trading is the use of computer programs to enter trading orders with sophisticated computer algorithm. This method decides on various aspects of the order such as the timing, price, quantity of the order, and the overall initiation of the order without any human intervention whatsoever.
This trading method has because extremely popular rather quickly. In fact, a third of all EU and US stock trades back in 2006 were algorithms.

Algorithmic trading

Skip ahead just three years later and high frequency trading firms now account for 73% of all US equity trading volume. While numbers have not been crunched just yet, it is predicted American and European markets will range as high as 80% with algorithm trades from 2008.
Algorithmic trading is most commonly used by pension funds, mutual funds, and other investor driven traders. The reason for this is to divide large trades into countless small trades. As a result, it helps to manage market impact and the overall risk.