Algo Trading

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Algorithmic trading (for brevity, Algo), in simple words, is a step-by-step instruction for trading actions taken by computers (automated systems). Typically, trading algorithms enable the traders to automate the process of taking trading decisions based on the preset rules / strategies.

Market participants, both clients and propriety trading by brokers, have adopted algorithmic trading as it provides speed, control and anonymity to the end user. Further, delegation of decision making to the algorithms has enabled traders to generate large number of orders in a small interval of time, and at the same time, react to opportunities that may exist for fractions of a second and also help keep out the human emotions while maximizing the profits and minimizing the loses! 

High Frequency Trading (HFT) is a subset of algorithmic trading that comprises latency-sensitive trading strategies and deploys technology including high speed networks, colocation, etc. to connect and trade on the trading platform. The growth and success of the high frequency trading (latency sensitive version of algorithmic trading) is largely attributed to their ability to react to trading opportunities that may last only for a very small fraction of a second. Co-location and technology has provided the vehicle to high frequency traders to capture such trading opportunities.