Stock Trading Programs - Definitions

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Stock Trading Definitions


Black Box Trading

Definition of Black Box Trading  The benefits of a "black box trading" system is that a computer isn't subject to human error. In addition, a computer can do millions of calculations per minute that a human being is just not capable of.

In addition to generating potential buys and sells, the "black box trading" system will also enter and close orders based on pre-programmed logic. The benefit to this type of system is that a computer doesn't tire, and is capable of processing tens of thousands per trades per day. A human being is not capable of this type of volume - in addition, a human being will make errors along the way in the filling of their trades.

Black box trading algorithms provide are typically packaged, non-modifiable algorithms and though black box trading systems can accommodate different trading styles the limitation of the black box trading software approach is that users must rely on strategies already developed by someone else, rather than being allowed to implement strategies based on their own expertise and experience. The restrictions of black box trading algorithms represent why so many worldwide capital market firms have opted for the “white box” approach, like our recommended software program.



Definition of Scalpers  Who They Are and What They Do

A scalper is a type of trader that may dart in and out of a stock or other asset class dozens, or in some cases even hundreds, of times a day. The reason these individuals are so active is that they hope to reap a small profit on each trade and that these small profits will add up to big dough at the end of the day. A scalper's goal and job description is fairly similar to that of a market maker.

The Costs
There are several issues that make being a scalper difficult. First off, maintaining such a large number of positions can be very time consuming. In fact, it is somewhat safe to say that the scalper will be glued to his or her monitor all day waiting for the slightest moves in order to get in and out of positions. Being a scalper can also be costly (both in terms of dollars and opportunity cost).

Tools of the Trade
Scalpers need some special equipment if they want to be successful. This might include having access to Level II quotes to track bids and asks throughout the trading session. Having access to charting information and a phone line is also essential. However, using our recommended trading program would be a boon to a scalper and they would not be glued to his or her monitor all day and there would be no need for yhe many charts or a phone line to call their broker!



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Definition of Algo Trading

Definition of Algo Trading Algo Trading is simply another, shorter simpler name for Algorithmic Trading

Algo trading is a trading system that utilizes very advanced mathematical models for making transaction decisions in the financial markets. The strict rules built into the model attempt to determine the optimal time for an order to be placed that will cause the least amount of impact on a stock's price.


Automated Trading aka Automatic Trading

Automated Trading is also known as automatic trading or algorithmic trading, black-box trading, or algo trading (all shown above), is the use of electronic platforms for entering trading orders with an algorithm which executes pre-programmed trading instructions whose variables may include timing, price, or quantity of the order, or in many cases initiating the order without human intervention. Algorithmic trading is widely used by investment banks, pension funds, mutual funds, and other buy-side (investor-driven) institutional traders, including some hedge funds, generating and executing orders automatically.

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