// WHAT IS AN ALGORITHM

The engine behind modern markets.

Algorithmic trading has driven financial markets for decades. Here's what it actually means and why it matters for you.

// THE DEFINITION

What are trading algorithms?

A trading algorithm is a set of rules that automatically buys and sells financial assets — like currencies, stocks, or commodities — based on data and pre-defined conditions. Unlike a human trader, it has no emotion, it doesn't panic when markets drop, or get greedy when they rise. It simply follows its rules, around the clock, without hesitation or error.

For decades, algorithms have been the backbone of financial markets. Around 70% of all trades are now executed by algorithms rather than humans. Investment banks use them for high-frequency trading. Hedge funds use them to run systematic strategies across global markets.

The strategies vary enormously. Some look for tiny price discrepancies between assets and exploit them in milliseconds. Others analyse long-term trends and take positions that hold for weeks. Some use machine learning to spot patterns that no human would notice.

// A simple example

The Gold & Silver Strategy

How a trading algorithm thinks and acts — automatically, 24 hours a day.

Step 1 of 4: Watching the ratio, 24/7.
1
Watching the ratio, 24/7
The algorithm monitors the price ratio between gold and silver in real time — every second of every day. The ratio is near its historical average of 80. Nothing to do yet.

Simplified illustration for educational purposes. Real strategies are more complex and may behave differently in live markets.
Backtested performance does not guarantee future results. This is not investment advice.

// WHY IT MATTERS

Why algorithms outperform human traders.

Algorithms

Rules-based, automated, consistent

  • Runs 24/7 without breaks or fatigue
  • No emotional decisions; follows its rules exactly
  • Executes instantly when conditions are met
  • Backtestable against historical data before going live
  • Fully consistent; the 1,000th trade follows the same logic as the first

Human Trader

Intuition-based, manual, variable

  • Needs sleep, misses overnight moves
  • Subject to fear, greed, and hesitation
  • Reaction time limited by human cognition
  • Past decisions can't be reliably replicated or tested
  • Performance varies day to day based on mood and energy
// GET STARTED

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