How Algorithms Are Used to Place Trades Faster in Algo Trading

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How Algorithms Are Used to Place Trades Faster in Algo Trading

Pre-defined Rules Set by Trader

  • You (the trader) decide the conditions to buy or sell a stock.
  • Example:

“If Nifty goes above 20-day moving average, then BUY”
“If RSI is below 30, then SELL”

These are called trading strategies or rules.

Algorithm Monitors the Market 24/7

  • The algo system is connected to live market data.
  • It continuously scans the market every second for the conditions you set.
  • Unlike humans, it doesn’t get tired, distracted, or emotional.

Instant Execution (in milliseconds!)

  • Once your conditions are met, the algorithm automatically places the order.
  • Example: Buy 50 shares of Infosys the moment the price touches ₹1,500.

💡 Speed Advantage:
Manual traders may take 2–3 seconds to react.
Algos take less than 0.01 seconds to place the order. No Emotions, Pure Logic

·         Humans panic, overthink, or hesitate.

·         Algorithms just follow the code – no fear or greed.

·         This removes emotional mistakes from trading.

Scalability (Thousands of Trades Possible)

·         An algo can manage hundreds of stocks at the same time.

·         It can run multiple strategies simultaneously.

·         Something impossible for a human to do manually.

 

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