Algorithmic trading has revolutionized the finance world in recent years. But how does this system work exactly and why has it become so important? Frankly, I was curious about these things, so I did some small research for you and summarized it into 5 main headings.

Let me explain simply 👇

First of all, the expert on this topic is our teacher @kivancozbilgic from the Turkish community. Whenever you have any questions regarding this topic, you can directly find the source from Kıvanç teacher and learn from him.

1️⃣ What is algorithmic trading?

It is when a computer automatically executes trades according to predefined rules instead of a person manually entering orders. Buying and selling decisions occur in less than a second based on price, time, quantity, or market conditions.

You know those bots that we sometimes can't get past while trading? They are it :))

2️⃣ Why is it preferred?

• It is fast: It reacts millions of times faster than human reflexes.

• It is emotionless: There is no panic selling or FOMO.

• It is efficient: It even evaluates small price differences. Especially in large amounts, it can provide good returns in arbitrage with transactions of 0.5% for example.

3️⃣ Where is it used?

• HFT (High Frequency Trading)

• Market Making

• Arbitrage (Profit from price differences on different exchanges or stable-fiat price differences)

• Trend-following strategies

4️⃣ Why is it so critical?

Currently, more than 60% of orders in global financial markets are given by algorithmic systems. So, it can be said that nowadays, the rhythm of the market is determined not by people but by codes.

5️⃣ Are there risks as well?

Yes, system errors, chain reactions during high volatility moments, and manipulation risk are always present. For this reason, it is critically important for algorithms to be regularly tested and audited.

In conclusion; algorithmic trading has become the invisible engine of the finance world. When speed, accuracy, and strategy combine, the winners are usually the algorithms. We, as humans, are trying to stand out among them :))