PrePrint: Algorithmic Trading

Algorithmic trading is an arms race. In electronic financial markets, algorithmic trading is the use of computer programs to automate one or more stages of the trading process: pre-trade analysis (data analysis), trading signal generation (buy and sell recommendations), and trade execution; furthermore, trade execution is subdivided into two broad categories: agency/broker execution, when a system optimizes the execution of a trade on behalf of a client, and principal/proprietary trading, where an institution is trading on its own account. Each stage of this trading process can be conducted by humans, by humans+algorithms, or fully by algorithms. Given its increasing importance in financial markets and to computer professionals, this paper attempts to demystify Algorithmic Trading.

Index Terms: F.2.1 Numerical Algorithms and Problems, G.3 Probability and Statistics, G.4 Mathematical Software, I.2 Artificial Intelligence, I.5 Pattern Recognition, I.6 Simulation, Modeling, and Visualization, J.1.c Financial, C.2 Communication/Networking and Information Technology, Multimedia Information Systems, H.3.5 Online Information Services, web programming, web applications, Pervasive computing, mobile applications, Internet applications, database technology, Computer-supported cooperative work, C.2 Communication/Networking and Information Technology, Multimedia Information Systems, H.3.5 Online Information Services, web programming, web applications, Pervasive computing, mobile applications, Internet applications, database technology, Computer-supported cooperative work, G Mathematics of Computing, I Computing Methodologies, J.1.c Financial,Citation: Philip Treleaven, Giuseppe Nuti, Mahnoosh Mirghaemi, Chaiyakorn Yingsaeree, "Algorithmic Trading," Computer, 17 Jan. 2011. IEEE computer Society Digital Library. IEEE Computer Society, Usage of this product signifies your acceptance of the Terms of Use.

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