Identifying Misconceptions in Algorithmic Trading

Algorithmic trading involves the use of computer algorithms to trade securities at speeds and frequencies that are impossible for human traders. These algorithms can analyze market data, identify trading opportunities, and execute trades based on predefined criteria.

Consider the following statements regarding algorithmic trading:

1. Algorithmic trading is often used to execute large orders in a manner that minimizes market impact.

2. All algorithmic trading strategies are designed to take advantage of arbitrage opportunities.

3. Algorithmic trading can contribute to higher levels of market liquidity.

Based on your understanding of algorithmic trading, which statement is NOT true?