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Algorithmic trading uses computer algorithms to automatically execute trades based on predefined criteria, enabling high-speed and high-frequency trading that can capitalize on market inefficiencies. This method reduces human intervention, minimizes emotional decision-making, and can operate across multiple markets and asset classes simultaneously.
Price impact refers to the change in the market price of an asset caused by a specific transaction or series of transactions, reflecting the liquidity and depth of the market. Understanding Price impact is crucial for traders and investors as it affects transaction costs and the overall strategy for executing large orders without significantly altering the market price.
Market impact costs refer to the effect that a large trade has on the market price of an asset, often causing the price to move against the trader's interest. These costs are crucial for understanding the true cost of trading, especially for institutional investors executing large orders, as they can significantly influence the profitability of trading strategies.
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