What does the term “algorithmic trading” refer to in finance? 🔊
The term algorithmic trading refers to the use of computer algorithms to execute trading strategies in financial markets. These algorithms analyze market data, identify trading opportunities, and execute trades at speeds and frequencies not achievable by humans. Algorithmic trading can result in improved market efficiency, reduced transaction costs, and minimized human error. However, it may also contribute to increased market volatility and raise concerns about financial systems becoming overly dependent on technology. Regulatory frameworks are essential to ensure that algorithmic trading is conducted transparently and responsibly.
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