Algo Trading

An algorithm is a sequence of unambiguous instructions to obtain a required output for any legitimate input within a finite amount of time.

Algorithms have a defined beginning where the input data is processed using a definite logic and executed systematically using a finite number of steps to produce an output. One can combine several short algorithms and perform tasks of varying complexities while solving problem statements.

Financial companies use algorithms in areas such as loan pricing, asset liability management, stock trading, portfolio management etc. For example, algorithmic trading deploys algorithms to make trading decisions like timing, price, and quantity in the orders.


Financial firms use algorithms in areas such as loan pricing, asset-liability management, equity trading, portfolio management, etc. For example, algorithmic trading uses algorithms to make trading decisions such as timing, prices, and order quantities.

 Algorithmic trading, also known as black boxing trading in some cases, or simply algo trading, is the process of placing orders in the market based on a certain trading logic via online trading terminals, which execute the instructions generated by various trading algorithms.

In simple words, it is using a defined set of instructions in the form of an algorithm to generate trading signals and place orders.  Each algorithm can be assumed to have access to current and historical prices of instruments that can be bought and sold after performing computations based on the prices. The algorithm may even split the order into small pieces and execute them at different times to get the best possible prices.

Technical necessities for Algorithmic Trading

  • Knowledge of a programming language to create and run the algorithms on unique buying and selling platforms.


  • Access to the stay information from the respective market(s) at the buying and selling platform that may be monitored through the algorithms.


  • Availability of historic information for backtesting. • The infrastructure to backtest and alternate in actual time is primarily based totally on the buying and selling set of rules created.

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