Typically market makers use algorithmic trades to create liquidity. Algorithmic trading also allows for faster and easier execution of orders, making it attractive for exchanges. In turn, this means that traders and investors can quickly book profits off small changes in price.
What is algo trading & how does it work?
Apart from profit opportunities for the trader, algo-trading renders markets more liquid and trading more systematic by ruling out the impact of human emotions on trading activities. Algorithmic trading combines computer programming and financial markets to execute trades at precise moments.
What is a market timing algorithm?
Market timing algorithms will typically use technical indicators such as moving averages but can also include pattern recognition logic implemented using finite-state machines. [citation needed] Backtesting the algorithm is typically the first stage and involves simulating the hypothetical trades through an in-sample data period.
