Please allow me for this topic to quote Investopedia [1], and not Wikipedia (which I respect and appreciate).
"..is a type of trading done with the use of mathematical formulas run by powerful computers.."
"..makes use of much more complex formulas, combined with mathematical models and human oversight, to make decisions to buy or sell financial securities on an exchange.."
Ps: In simple english, I go to work, that thing makes profit (if done right). I go to sleep, that thing makes profit. Someone important twits, that thing either makes profit, OR goes bust.
Investopedia makes the same mistake. When you sleep and computer makes you some money, it's automated trading, systematic trading, mechanical trading. This kind of trading was in the industry for centuries: you incent some rules and follow them. Algoritmic trading is about executing large orders by slicing them and filling them thru a trading day. These are the terms seriours industry professionals are using. If you apply for algo trading job in a bank you will not be writing a cash making bot.
Yeah, my impression is that professionals distinguish algorithmic trading (minimising price impact of a given order) and automated trading (rule based trading to generate profit), while amateurs (including Investopedia) tend to use the term "algorithmic trading" either for both, or for the latter while being completely unfamiliar with the former.
Correct. And it is not just Investopedia who is misleading. Type Algorithmic trading in amazon search and you will see tens of books on this topic that have nothing to do with algorithmic trading. No wonder some people are claiming they are doing algorithmictrading and even high frequency trading using their laptops from their bedrooms.
"..is a type of trading done with the use of mathematical formulas run by powerful computers.."
"..makes use of much more complex formulas, combined with mathematical models and human oversight, to make decisions to buy or sell financial securities on an exchange.."
[1]: https://www.investopedia.com/terms/a/algorithmictrading.asp
Ps: In simple english, I go to work, that thing makes profit (if done right). I go to sleep, that thing makes profit. Someone important twits, that thing either makes profit, OR goes bust.