Understanding Algorithmic Trading Functions

Very Easy Equity Market Structure Algorithmic Trading

Algorithmic trading has become a significant aspect of modern equity markets, greatly impacting trading efficiency and pricing. Algorithms are used by traders and financial institutions to execute trades at optimal prices by analyzing multiple market conditions and data. A basic understanding of algorithmic trading is essential for investors, as it can influence market dynamics.

Which of the following statements best describes a primary function of algorithmic trading?

Algorithmic trading is primarily used to enhance the liquidity of the market.

Algorithmic trading is designed to reduce the transaction costs associated with manual trading.

Algorithmic trading is focused solely on high-frequency trading strategies.

Hint

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