Automated (or quantitative) trading -- also known as "black box trading," "algorithmic trading" and "statistical arbitrage" -- uses a computer program that automatically submits bids and/or offers based on certain data and decision criteria.
Quantitative trading strategies have two main features: 1. Human beings are not involved in the decision-making process and 2. The models are designed to "learn" like humans or to detect relationships among a sea of data that can't be detected by humans. The advantages of this type of trading are said to include faster and cheaper trading, dispassionate decisions, and processing more information than humans can.
Automated trading systems have evolved into highly complex split-second decision-making trading applications, creating both opportunities and challenges for all market participants. Anyone trading electronically is either trading on or against an ATS.
Also See: Algorithmic Trading
- ↑ Black Box Trading: Panacea or Promotion?. Information Arbitrage.
- ↑ The Evolution of the Automated Trader. Futures Industry Magazine.