algo-trading (algorithmic trading)

Algo-trading, also known as algorithmic trading, is an investment strategy that involves using advanced computer algorithms to make trading decisions in financial markets. By automating the process of making investment decisions, algo-trading enables quick responses to changing market conditions and execution of high trading volumes in a short period of time.

How does algo-trading work?

Algorithms used in algo-trading analyze market data such as asset prices, trading volume, technical indicators, and many other factors to identify potential investment opportunities. Based on these analyses, the algorithms make decisions regarding buying, selling, or holding positions in the market.

Advantages of algo-trading

One of the main advantages of algo-trading is the speed of reaction to market changes. Algorithms are capable of making investment decisions in fractions of a second, which helps to avoid delays and seize favorable moments in the market. Furthermore, algorithmic trading eliminates the emotional aspect of investing, leading to more rational investment decisions.

Risks associated with algo-trading

Despite many advantages, algo-trading also comes with certain risks. One of the main dangers is algorithm ‘overfitting’, which occurs when the algorithm operates on too aggressive settings and takes on too much investment risk. Additionally, there is a risk of technical errors that can lead to financial losses.

In conclusion, algo-trading is becoming an increasingly popular investment strategy, especially in the environment of crypto asset markets. By automating the process of making investment decisions, algorithmic trading enables investors to respond more quickly to market changes and make more objective investment decisions.