Automated trading systems, also known as algorithmic trading, operate by executing trades based on predefined criteria and algorithms. These systems analyze market data to identify potential trading opportunities, using various indicators and metrics to inform their decisions. Once a trading signal is generated (often in milliseconds), the system automatically executes the trade without human intervention.
Fundamentally, these systems rely on historical data to optimize strategies and reduce human error. They can function across multiple asset classes and employ strategies such as high-frequency trading, trend following, or arbitrage. Furthermore, automated systems can monitor multiple financial instruments simultaneously, allowing for the rapid execution of trades and the ability to react quickly to market changes.