by Algorithmic trading refers to an automated process of generating trade orders and accessing markets through the use of complex mathematical formulas and algorithms. Algorithmic trading programs scan the markets for opportunities to capitalize on tiny price changes that happen hundreds or even thousands of times each day and generate trade orders accordingly. This enables traders to place large volumes of trade orders in very short periods of time and achieve maximum profits from momentary changes in market prices. As managing a large volume of trades manually is very difficult and time-consuming, algorithmic trading programs are able assist traders by independently and automatically generating trade order based on predefined algorithms and rules with minimal or no human intervention.
The benefits of algorithmic trading include higher trading speeds, increased order volume capacity, possibility to back test strategies before implementing them, ability to incorporate larger set of market factors and patterns for analysis, and minimal emotional and cognitive biases. Algorithmic trading programs can monitor live market data feeds 24/7, spot profitable trading opportunities within fractions of a second based on pre-programmed analytical rules and execute trades in extremely short time periods that are impossible for human traders. This helps traders capitalize on very small, short-lived price swings and maximize profits from short term market moves.
The global Algorithmic Trading Market is estimated to be valued at US$ 2.18 Bn in 2024 and is expected to exhibit a CAGR of 5.5% over the forecast period 2023 to 2030, as highlighted in a new report published by Coherent Market Insights.
Market key trends:
One of the major trends in the algorithmic trading market is the rise of machine learning and artificial intelligence. Many trading firms are developing advanced algorithms based on machine learning concepts which can learn from vast historical market data and detect complex patterns and relationships that are impossible for human traders or traditional algorithms to recognize. This enables the algorithms to make increasingly accurate predictions of future market moves. Companies are also investing in building artificial intelligence systems that can continuously learn, evolve, and optimize trading strategies in real-time based on live market conditions without requiring reprogramming. This autonomous learning ability powered by AI is expected to make algorithmic trading even more precise and profit-generating over the coming years.
Porter’s Analysis
Threat of new entrants: High capital requirements for developing algorithmic trading systems and techniques and presence of established players pose high threat for new entrants.
Bargaining power of buyers: Large financial institutions have high bargaining power as buyers due to their ability to demand customized solutions and negotiate prices.
Bargaining power of suppliers: Presence of numerous technology providers supplying trading platforms and tools limits the bargaining power of individual suppliers.
Threat of new substitutes: Emerging technologies including artificial intelligence, machine learning etc pose threat of substitution.
Competitive rivalry: Intense competition exists among major players due to their global presence and capabilities to offer varied solutions.
Key Takeaways
The global Algorithmic Trading Market Growth is expected to witness high growth. The market size for 2024 is US$ 2.18 Bn indicating substantial expansion opportunities over the forecast period from 2023 to 2030.
Regional analysis –
North America dominates the market currently owing to large presence of wealth management firms and investment banks adopting algorithmic trading solutions in the region. Asia Pacific exhibits highest growth prospects led by growing capital markets in countries like China and India.
Key players operating in the algorithmic trading market are Thomson Reuters, 63 moons, Virtu Financial, MetaQuotes Software, Symphony Fintech, InfoReach, Argo SE, Kuberre Systems, TCS, Software AG, IBM, and uTrade. Algorithmic Trading Market.
*Note:
1. Source: Coherent Market Insights, Public sources, Desk research
2. We have leveraged AI tools to mine information and compile it
