How Do Stock Trading Algorithms Work?

The stock market can be a foracious beast to those that don't understand it, but nowadays, you don't even need to understand it to make money. The rise of the digital information age and AI has brought about a new way of stock trading called algorithmic trading. Sometimes referred to as automated trading or black-box trading, this is essentially a program that can trade stocks at high speeds and frequencies perfectly in line with the market.

These programs are given constraints and instructions like timing, price, amount, etc. and a user can fine tune how they exactly work. So how does this all work then... let's take a look.

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[fredmgbm]

your ability to explain complex concepts in a way that's simple to understand is unprecedented. love your work

[timtradingcomments]

There is an algo trader in my present. It runs on a Thinkpad x230. I've only uploaded one video so far, but will be demonstrating its capability in real time.

[thadonjuan]

Bro your videos are GREAT! Keep up the great work! Thank You!

[chaosofdarknessx]

Besides the Content that already is explained in an excellent way. You've a very creative approach with your Videos. !

[onee]

Actually HFTs do not add liquidity to the market. They make use of existing liquidity. This is why you would never see a HFT firm let their algorithms trade illiquid financial markets. However, HFT firms do love using that "sales pitch" towards ignorant politicians. The only reason HFTs aren't banned, is because brokers love the fact that they trade so much, which brings in a fat paycheck. Besides enriching themselves they don't add much value to the market to be honest.

[Supakills]

Great video I've always wondered about this.

[dgrandison]

I thought i was going to find a solution to my losing trade habits. Now I'm even more scared 'shitless'!

[Carpenglerrr]

Professional guidance brings about remunerative results. Great job Payden, you exceeded my expectations. Thank you.

[krutarthhaveliwala]

I may correct, Algorithm Trading and AI is the future.

[stagefright]

Great video, few questions:
1. So the brokerage or broker makes money on each "high frequency" transaction. Even if there is a discount. So the algorithms have that going against them. Correct?

2. Who is "losing" (per say) money when the algorithms are "winning"? Does the loss come from other sellers? And I suppose often times other algorithm sellers?

3. I would assume the companies are losing liquidity at the very least because their stock is being "held" by these algorithms. Is this correct? So it's forcing companies to put even more stock out there?

[James-wdib]

6:41 "Algorithmic trading probably isn't in your future..." huh? Why would you say that?

[alrey]

Great and simple explanations. However, how can HFT widen the bid ask spread? I think it's the opposite since there are many quotes nd trades, the spread will lessen.

[bbreon]

I've heard your voice on another channel before. It's very distinctive.

[spd]

What is the way to learn trading like Jim Simons?

[robertdz]

Algorithm for sale, a true Algorithm once launched no sitting in front of computer required. Only 4 licenses, 4 million per license.

[Frank]

I hope someone out algos the algo traders..and makes it obsolete.

[allamasadi]

Graham Stephen or Jeremy from Financial Education should have done a video on this!

[shukranali]

If you create an algorithm, how do you get it to place trades for you with your broker?

[Max-qdmb]

do you have any courses or other material you would recommend to learn more about algo trading?

[trentmorris]

Algorithmic trading always loses money, all it does is follow trends. In order to truly make money in the market you need to beat trends. The computers keeps buying overvalued tech stocks which artificially inflates their price. I see a NASDAQ crash coming soon. It will be the App bubble instead of a dot com bubble.