Algorithmic trading is the process of executing orders using automated and pre-programmed trading instructions that consider elements like price, timing, and volume. An algorithm is a set of instructions for solving a problem. Computer algorithms gradually release smaller parts of the entire order to the market.
Any efficient Algorithmic trading strategy must increase trading revenues while lowering trading costs. The most popular strategies include arbitrage, mean reversion, market timing, and index fund rebalancing. Pairs trading, transaction cost minimization, and scalping are additional strategies.