Introduction to Algorithmic Trading

Algorithmic trading means a strategy's entry, sizing, and exit rules are encoded precisely enough that a computer can execute them without human judgment in the moment. The judgment is front-loaded: it happens when the rules are designed, reviewed, and tested -- not while a position is open.

This trade-off is deliberate. Removing in-the-moment human judgment removes hesitation and emotional decision-making, but it also removes the ability to react to context the rules didn't anticipate -- which is exactly why the rules themselves need to be conservative and well-tested.