Algorithmic Trading and Execution Strategies

In a recent analysis of algorithmic trading strategies utilized by hedge funds, a research team highlighted various approaches to executing trades in equity markets. Algorithmic trading involves using complex mathematical models and automated systems to execute orders in the market. The study examined three predominant types of algorithmic trading strategies: execution algorithms, arbitrage algorithms, and market-making algorithms. Each strategy has different objectives, such as minimizing trading costs or enhancing market liquidity.

As part of the analysis, the research team focused on a hedge fund, AlgoInvest, which has implemented a specific execution algorithm. This algorithm is designed to analyze past and real-time market data to optimally determine the execution time and size of trades, while aiming to reduce market impact. The hedge fund claims that this approach enables them to achieve better average prices compared to traditional execution methods.

Given this context, which type of algorithm does AlgoInvest primarily utilize in this trading approach?