Algorithmic Trading – From Microwave Technology to Colocation and Neural Networks

Gone are the days of a room full of traders frantically executing trades trying to follow volatile market. Computer algorithms are the technology that shape the market today. Up to 70% of all trades in the United States are now performed by machines and not humans.

While algorithmic trading is continuing to grow, the technology keeps improving as well. There are a number of significant technological advancements that are already being implemented and may become a part of the near future in trading. These range from simply improving on precision and speed of trade execution to using complex AI systems to perform market analysis and make accurate trend prediction. In this article we will take a look at the most promising technology to improve and develop algorithmic trading.

Technological progression


For those unfamiliar with algorithmic trading, it can be defined as any trading that takes place on an automated level. Computers are given specific algorithms for making trades at large volumes and high speeds. The most significant advantage of algo trading is speedy execution. Computers have the ability to execute trades millions of times faster than a human being would be able to execute them manually. It is hard for a person to even comprehend the value of a nanosecond while it is crucial to get ahead of the competing traders.

Faster speed means efficient surveillance of the state of the market and better monitoring of changes in price and volume. Algorithmic trading can potentially help traders execute orders faster, expand strategy portfolios by using more advanced quantitative tools and remove human emotions that often affect the performance of trading strategies.

The future systems that are being developed and tested now will eliminate errors by analyzing the market, historical data and trading history much faster than is currently possible. They will have an ability to employ different trading strategies by spreading the risk across multiple accounts and quickly adjusting to changing market conditions.

The hardware can also be improved, implementing programmable chips for the most efficient and advanced performance where the algorithm will be able to perform multiple tasks at once utilizing a single engine. Read More...

Technological progression
Algorithmic Trading