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Finance GlossaryAlgorithmic Trading
Algorithmic Trading
Definition of Algorithmic Trading
Algorithmic trading or algo trading means buying and selling securities using computer algorithms that follow a set of predefined rules to execute trades.
In algo trading, predefined rules can be set to act on triggers like stock price, volume, time, and others.
In algo trading, predefined rules can be set to act on triggers like stock price, volume, time, and others.
Related Terms
Contingent Liabilities
A contingent liability is shown on a balance sheet for an event that may or may not happen in the future. The potential liability arising out of such an uncertain event is recorded as a contingency in both GAAP and IFRS accounting standards.
Bottom Line in Finance
Bottom line in finance is used to refer to a company’s crucial metrics like earnings, profits, net profits, earnings per share (EPS), and others.
Any move or action that can impact a company’s profit or net profit in a positive or negative direction is also referred to as the bottom line.
“Bottom line” is called such because the crucial metrics of a company are generally found at the bottom of a financial statement.
Any move or action that can impact a company’s profit or net profit in a positive or negative direction is also referred to as the bottom line.
“Bottom line” is called such because the crucial metrics of a company are generally found at the bottom of a financial statement.
Common Stocks
A common stock is a type of share that gives the holder the right to a part of a company’s profits, voting on key policies and decisions. Common stockholders have an advantage over preferred stockholders because they can:
- Get higher returns
- A part of the assets left after a company is liquidated (in case of default)
Index Arbitrage
Index arbitrage is the method of generating returns by trading the difference between the same or different indices that have a standard value but has diverged momentarily. The way one does index arbitrage can vary as it is possible to trade indices via ETFs, Options, Futures, and more.
Forward Market
The forward market is a place where forward contracts are traded. A forward is an over-the-counter derivative that carries a pre-agreed expiration date and price on which the contract must be exercised. It carries a right and an obligation.
Forwards are similar to futures but there is one major difference - forwards are unregulated instruments. Any entity writing a forward contract can customize the lot size and other details to fit their needs.
The forward market, as a whole, is an unregulated market whose typical participants include banks, vendors, and other large financial players.
Forwards are similar to futures but there is one major difference - forwards are unregulated instruments. Any entity writing a forward contract can customize the lot size and other details to fit their needs.
The forward market, as a whole, is an unregulated market whose typical participants include banks, vendors, and other large financial players.
Liquidity Risk
Liquidity Risk is the potential inability of a company to fulfil its debt obligations. It also refers to the lack of liquidity that an equity share of other financial instruments like commodity futures may carry.
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