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Algorithmic Trading Concepts

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Limit Order Book

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A record of all the buy and sell orders for a specific security arranged by price level. Algorithmic traders analyze this data to make better trading decisions and predict short-term market movements.

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Algorithmic Trading Strategies

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These are predefined sets of rules for automatic trade execution, which can include strategies such as momentum, mean reversion, market making, arbitrage, and sentiment-based trading, among others.

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High-Frequency Trading (HFT)

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HFT is a form of algorithmic trading that involves executing thousands or millions of trades within seconds or fractions of a second, utilizing advanced algorithmic strategies to exploit small price discrepancies and market inefficiencies.

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Market Making

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Market making is a strategy used by traders to provide liquidity by simultaneously quoting bid and ask prices for a particular security, aiming to profit from the spread between the buy and sell price.

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Smart Order Routing (SOR)

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Smart Order Routing is an automated online trading method used to route orders, seeking the best possible price across multiple trading venues, and is crucial in fragmented markets.

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Quantitative Analysis

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The use of mathematical and statistical models in trading to determine trading opportunities, define risk, and manage financial investments. Quants analyze market data and trends using complex algorithms.

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Statistical Arbitrage

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This strategy exploits statistical mispricing or correlation anomalies between different assets by simultaneously buying and selling related securities to achieve a risk-adjusted profit.

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Backtesting

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Backtesting is the process of testing a trading strategy using historical data to assess its viability before risking any actual capital. It is an essential part of developing an algorithmic trading system.

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