Algorthmic trading is the trading of financial securities based on an algorithm.

The world of trading is changing. Ten years ago, traders were people watching financial markets and making “point and click” decisions about whether to buy or sell an asset. These decisions could be based on some technical analysis, but also “gut instinct.” This form of trading is increasingly being replaced by algorithmic trading. An algorithm is a decision-making rule. If X, then Y. Trading algorithms use real-time data feeds to assess any change in a market price and then the decision rule determines the action based on these prices. Because the process is highly automated, trading has become increasingly high frequency. This is not “day trading.” This is trading in nano-seconds. The growing future of algorithmic trading is machine learning and AI. This allows the algorithm to learn from previous experience (data) and adjust the decision-rules accordingly.