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.