Article Four Big Risks of Algorithmic High Frequency Trading

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Algorithmic trading (or “algo” trading) refers to the use of computer algorithms (basically a set of rules or instructions to make a computer perform a given task) for trading large blocks of stocks or other financial assets while minimizing the market impact of such trades. Algorithmic trading involves placing trades based on defined criteria and carving up these trades into smaller lots so that the price of the stock or asset isn’t impacted significantly.
The benefits of algorithmic trading are obvious: it ensures “best execution” of trades because it minimizes the human element, and it can be used to trade multiple markets and assets far more efficiently than a flesh-and-bones trader could hope to do.
What is Algorithmic High-Frequency Trading? High-frequency trading (HFT) takes algorithmic trading to a different level altogether — think of it as algo trading on steroids. As the term implies, high-frequency trading involves placing thousands of orders at blindingly fast...

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