Algorithmic trading is a type of trading, during which one large order is divided into many small ones, using special splitting algorithms. The price characteristics of each order are processed, and then sent for execution. The main purpose of this method is to execute orders. Everyone knows that the more an order is placed on the market, the more difficult it is to execute it, that is, to find a second party who will agree to buy or sell an asset. But if you divide it into many small ones, then the probability of their execution will become much higher. Let's take an example. The trader has 10,000 BTC that he wants to sell.

If he puts the entire lot up for sale, at an average market price of \$50,000 per BTC, then the buyer must pay him \$500 million. Why is it not profitable to put such an asset on the exchange? Seeing a large lot in the glass of orders, other market participants will begin to reduce the price in order to sell their assets faster, thereby the price of it will begin to decline rapidly. A large number of assets are bought by large market participants, and transactions are carried out, as a rule, through over-the-counter platforms (OTC), so that this does not affect the price of the asset in any way. It turns out that dividing into many small orders keeps the profit for the trader, because the price of the asset does not fall, and the probability of execution increases. Basic concepts As we have already found out, algorithmic trading is trading software or a trading robot. This software contains a trading algorithm: position size, take profit and stop loss, other orders, etc. In 2021, there are two main types of robots: Automated.

The bot software contains all the necessary information about the trading process, after which it analyzes the market, opens and closes transactions, and selects the lot size. Semi-automated. Here, robots analyze the market and provide information about the most relevant transactions. The right to open and close a transaction remains with the trader. As a rule, automated robots are more popular. In essence, semi-automated bots perform technical analysis that a trader can do on his own, but he does not have to pay for it. Advantages and disadvantages Algorithmic trading accounts for about 60% of all transactions in the financial markets.

With such an impressive indicator, it seems that trading robots cannot have disadvantages, but this is not so. Let's talk about the pros and cons of algorithmic trading: pros Speed. A person will not be able to simultaneously conduct a technical analysis of several assets and open many transactions, which a trading robot can handle. Accuracy. When setting opening and closing prices, extra symbols will not be accidentally set, which can happen to a person. Versatility and scalability. When purchasing a trading robot from an experienced trader, there is a chance that it is developed with high quality.