Algorithmic trading, also known as algo trading or automated trading, refers to the use of computer programs and pre-defined instructions (algorithms) to execute trades in financial markets. These instructions can be based on various factors such as price, timing, volume, or technical indicators.
The main goal of algorithmic trading is to automate the trading process, minimizing human intervention and emotion, while increasing execution speed, efficiency, and precision.
Key benefits of algorithmic trading:
Speed: Orders are executed instantly, often faster than any manual action;
Accuracy: Reduces human error by following strict, predefined rules;
Backtesting: Strategies can be tested on historical data before being used in live markets;
Emotion-free trading: Eliminates psychological biases such as fear or greed;
Scalability: Can handle complex strategies and trade multiple instruments simultaneously.
Popular algorithmic strategies include:
Trend-following (using indicators like moving averages or breakout systems);
Arbitrage (exploiting price differences across markets or instruments);
Market making (placing simultaneous buy and sell orders to capture spread);
High-frequency trading (HFT).
At FxPro, clients can implement algorithmic trading through platforms such as:
MetaTrader 4 (MT4) and MetaTrader 5 (MT5) using Expert Advisors (EAs);
cTrader Automate, which supports custom C# algorithms;
VPS hosting for continuous, uninterrupted trading.
Algorithmic trading is suitable for both retail and institutional traders who seek to enhance performance through technology and systematic approaches.
