Chapter 7

Comprehending Automated Trading

In This Chapter

arrow Knowing who creates automated trading systems

arrow Running an automated trading strategy

arrow Examining the importance of algorithms

Automated computer programmed trading is a major function in dark pools (as well as in lit markets). It provides much of the liquidity and market depth in today’s markets. Often thought to be the same as high frequency trading (HFT), automated trading is in fact quite different. Although all HFT is automated trading, not all automated trading is HFT, as this chapter explains.

Automated trading is a major part of today’s financial markets. In one form or another, nearly all professional market participants use it. Traditional market makers, traders and institutions mainly use automated trading to execute large orders. To fully comprehend how the markets work, you need to have a basic knowledge of automated trading and algorithms. You don’t need to become a quantitative analyst yourself or build your own algorithms. As technology progresses you’ll find more automated trading processes being offered to you. By knowing how they work, you’ll be better equipped to get the most out of these tools for your own ...

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