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An Investor's Guide to Algorithmic Trading


Published on 2025-03-10 17:21:19 - GOBankingRates
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  • Knowing how algorithmic trading works is key to success. This guide will break down what it is, how it works and why it could help your investments.

The article "An Investor's Guide to Algorithmic Trading" from MSN provides an overview of how algorithmic trading, or algo-trading, functions within financial markets. It explains that algorithmic trading involves using computer programs to execute trades based on predefined criteria such as timing, price, or volume, aiming to achieve the best possible price, reduce transaction costs, and manage risk. The piece discusses various strategies like trend following, arbitrage, and market making, highlighting how these algorithms can analyze vast amounts of data much faster than humans, thereby capitalizing on market inefficiencies. It also touches on the benefits like speed, accuracy, and the ability to backtest strategies, but warns of potential downsides including system errors, over-reliance on technology, and the risk of market manipulation. The article emphasizes the importance of understanding both the technology and the market dynamics before engaging in algorithmic trading, and it suggests that while it can be highly profitable, it requires significant expertise and continuous monitoring.

Read the Full GOBankingRates Article at:
[ https://www.msn.com/en-xl/money/other/an-investor-s-guide-to-algorithmic-trading/ar-AA1ADs0R ]