Algorithmic trading automates buy and sell orders according to predefined indicators, such as price changes or trading volatility. It can turn a trader’s plan into disciplined execution and reduce emotion in decision-making. section 1.3.3
Algorithmic trading sits within a broader range of automated and short-term approaches:
- A day trader can automate a plan while keeping positions within the same trading day. section 1.3.3
- A robo trader can use traditional machine learning to produce consistent buy, sell, or hold signals and trigger orders. section 8.1.5
- High-frequency trading extends automation toward microsecond execution, large order volumes, and fleeting price differences. section 1.3.3
A disciplined trading plan
A trader specifies indicators and order rules, then lets an algorithm execute them instead of making each decision manually. Automation may improve discipline, but profitable performance can reverse unexpectedly, and machine-learning systems may not explain why. section 1.3.3 section 8.1.5
