Algorithmic (Algo) Trading

Algo trading uses automated systems to execute trades based on pre-defined conditions, reducing human emotions in decision-making.

Key Points:

  • Uses high-speed computing and mathematical models to trade.
  • Includes High-Frequency Trading (HFT), where trades are executed in milliseconds.
  • Common in institutional trading and hedge funds.

Time Frames Used:

  • Milliseconds to minutes for HFT
  • 5-minute (M5) to Daily (D1) for rule-based trading

Example: An algo trading bot executes a scalping strategy on Bank Nifty options based on RSI and Moving Average crossovers.

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