Glossary

Algorithmic Trading

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Algorithmic trading is financial trading that is executed by software as opposed to humans. This software will follow a pre-programmed strategy. Trading algorithms have superior speed and computational power compared to humans.

Algorithmic trading is employed for many reasons. Computers are able to perform complex computations very quickly, making these algorithms great for situations that require extreme speed, such as arbitrage opportunities. Trading algorithms can also be used for very straightforward strategies to save a human the time and effort of doing it manually.

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Price Discovery
Price discovery is the process of determining an asset’s price. This happens naturally as traders place orders.
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Market Maker
A market maker is willing to buy or sell large quantities of an asset simultaneously. This adds significant liquidity to the market.
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Volume-Weighted Average Price (VWAP)
VWAP is the measure of an asset’s volume-weighted average price. An asset’s volume-weighted average price (VWAP) is calculated by taking the average of every trade in a specified time period.
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Time-Weighted Average Price (TWAP)
Time-Weighted Average Price (TWAP) is the measure of an asset’s average price over a period of time. TWAP is used as a method for purchasing a large amount of an asset while avoiding slippage.
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