In plain English
What Algorithmic trading means
An algorithm can decide when to trade, how much to trade, and how to submit the order. Some systems are fully automated; others only generate signals that a person then executes. The core idea is that software applies pre-set logic consistently, which can speed execution and standardize decision-making.
Why it matters
Algorithms are used to reduce manual delay, enforce rules, and handle repeatable tasks. They can also concentrate risk if the strategy or code is flawed, especially when market conditions change faster than the model expected.
Example
A simple algorithm might buy EUR/USD when a moving average crosses above another moving average and place a stop-loss 20 pips below the entry. The software can calculate and submit both orders without a trader manually entering each step.
Quick answers
Common questions
Is every automated strategy algorithmic trading?+
Yes, in the practical sense that software is using rules to generate or manage trades. But not every algorithmic strategy is fully automated from signal to execution.
Does algorithmic trading mean machine learning?+
No. Machine learning may be used, but many algorithms are based on fixed rules such as indicators, price thresholds, or time filters.
Sources