Algorithmic trading is commonly called algo trading or automated trading. Here an algorithm is used in order to precisely trade on a set of rules governing changes in a market condition. An algo trading portfolio therefore is in essence an extremely profitable capital market property.
In simple words your algorithmic trading portfolio may mean a fund created for entering the trading orders electronically with an algorithm. Variables like time and quantity of the order and also the prices play the pivotal role of guiding factors to the algorithm. It is more of an investment strategy that aims at market making through trend following, arbitrage, pure speculation at times and inter-market spreading.
Facts you should know about algorithmic trading:
· You as an investor can take investment decisions at any time with the help of algorithms.
· Investor-driven organizations such as investment banks, mutual funds and pension funds widely practice algorithmic trading. This in turn reduces their financial risks and market impacts through divisions into strategic and smaller trades.
· This has been instrumental for bringing about drastic changes in liquidity management in the market.
The basic idea that works as the backbone here is diversifying risk into smaller pockets. These in effect help amortize windfall losses and maximize ROI (Return on Investment).
4XFX has produced an innovative algo trading portfolio and algorithm for its many clients and by doing so has helped more people enter a more solid market while also keeping the ROI potentially higher than most solid investment properties in the capital markets.