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      Trade CFDs on key US shares 24/5.

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      Discover our tight spreads, plus all other possble fees

    • Trading hours
    • Maintenance schedule
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    • Forex

      Get great rates on majors like EUR/USD, plus minors and exotics

    • Commodities

      Trade on metals, energies & softs, with oil spreads from 2 cents

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      Speculate on Bitcoin, Ether and more, with a trusted broker

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    • Dividends for index CFDs
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    • CFD forwards
    • TradingView

      Trade through supercharts with tight spreads

    • MetaTrader 5

      Explore the apex in trading automation with our execution tech

    • The Pepperstone platform
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    • cTrader
    • Trading tools
    • Navigating markets

      Latest news and analysis from our experts

    • The Daily Fix

      Your regular round-up of key events

    • Meet the analysts

      Our global team giving your trading the edge

    • Who we are

      Pepperstone was born from the dream of making trading better

    • Company news
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Beginner

Algorithmic Trading

Algorithmic trading, or ‘algo trading,’ involves using automated, pre-programmed trading instructions to buy or sell assets based on variables like time, price, and volume.

Algorithmic Trading

Algorithmic trading meaning

Algorithmic trading algorithms allow trades to be executed at high speeds with efficiency and precision, which is particularly useful in fast-moving markets such as stocks, forex, commodities, and cryptocurrency.

Key Elements / Features

  • Automated Systems: Algorithmic trading uses software to automate the entire trading process, reducing the need for manual intervention.
  • Execution Speed: Algorithms can execute orders at an impossible speed and frequency for human traders, capitalising on market opportunities in milliseconds.
  • Elimination of human emotions: By relying on pre-set rules, algorithmic trading removes the influence of human emotions, leading to more objective decision-making.
  • Data-Driven Decision-Making: Algorithms analyse vast amounts of data to make real-time trading decisions based on pre-set rules.

Benefits

Algorithmic trading offers several advantages, including increased efficiency and reduced human error. It also allows high scalability and larger volumes of orders, as algorithms can monitor multiple markets and execute trades across many assets.

Risks

Despite its powerful benefits, algorithmic trading comes with potential risks, such as over-reliance on technology, vulnerability to market volatility and possible system glitches that could disrupt trading operations.

Example(s)

An example of algorithmic trading is high-frequency trading (HFT), where algorithms place numerous small trades quickly to capitalise on small price movements and discrepancies. Another example is arbitrage strategies, where algorithms exploit price differences for the same asset across different markets to generate profit.


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Pepperstone doesn’t represent that the material provided here is accurate, current or complete, and therefore shouldn’t be relied upon as such. The information, whether from a third party or not, isn’t to be considered as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product or instrument; or to participate in any particular trading strategy. It does not take into account readers’ financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of Pepperstone, reproduction or redistribution of this information isn’t permitted.

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Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.1% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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