You must have heard about it. In fact, I sometimes get questions about this. What are Algorithmic Transactions? Do you prefer it?

Let me explain briefly as well. Especially, Professor Kıvanç Özbilgiç has done a lot of work on this subject.

Now let's come to the Algorithm;

Let's start with a simple analogy: Recipe😀

Imagine a recipe. The recipe says:

Step 1: Put 2 tablespoons of oil in the pot.
Step 2: Once the oil is hot, add the onion and sauté until it turns golden brown.
Step 3: Add the tomatoes, cook for 5 minutes.
Step 4: Add the spices, stir.

This is an algorithm. You will prepare the dish by following these steps one by one.

Well, what does this have to do with the exchange?

In exchanges or cryptocurrency markets, buying and selling transactions are generally carried out manually by individual investors. That is, they track the price and press the buy or sell button whenever they deem it appropriate.

Algorithmic transactions are when computer programs or predefined strategies perform this process instead of humans.

Algorithmic Trading (: It is a method of automatically buying and selling financial assets such as stocks, currencies, and commodities without human intervention, following a predefined set of rules and instructions based on the algorithm ).

How Do Algorithmic Transactions Work? (3 Simple Step)

1. Strategy Development: Establishes a strategy such as "buy if this condition occurs, sell if this condition occurs." This strategy may be based on technical analysis (charts), statistical models, or fundamental analysis.
The determined strategies are converted into an algorithm.

2. Programming: This strategy is typically converted into a computer program using languages such as Python, C++. The program continuously monitors market data.

3. Automatic Execution: The program automatically sends a buy or sell order to the exchange within a very small fraction of a second, as soon as the specified conditions are met, within ( milliseconds.

These rules are converted into an algorithm. Then the computer applies these rules 24/7. So you don't monitor the price, the system trades automatically on your behalf.

These systems are generally:
•Bots )trade bots(
•Automatic order systems
It operates through high-frequency trading platforms.

Why is it important?
1-Eliminates emotional decisions
People may trade at the wrong time out of fear or greed. Algorithms only look at the rules.
Provides speed
While a person can perform 1 transaction per second, an algorithm can carry out thousands of transactions. This means seizing opportunities instantly.
3-Offers a disciplined strategy
Sticks to the predetermined plan. Executes transactions in accordance with the rules without blinking.
tracks for 4-24 hours
In environments like the cryptocurrency market that never close, it is impossible for a person to be constantly in front of the screen. The algorithm does not miss opportunities.
5-It is the preference of large investors.
A significant portion of large funds in the world conducts its transactions using algorithms. Because it is not possible to manage large volumes manually.

There Are Risks as Much as Advantages

Like every powerful tool, algorithmic processes also have aspects that need to be considered:
•A wrongly written algorithm can lead to serious damages.
•The system strategy may become invalid when market conditions change.
•Automated trading reduces human intervention; this can sometimes increase the risk during sudden crashes.

Algorithmic trading has now become a method that can be used not only by large institutions but also by individual investors.
The aim is to evaluate market opportunities more efficiently by executing trades in an emotionless, disciplined, and rapid manner.

Let's not forget that we are the ones who write the strategy; the success of algorithmic transactions is as great as the knowledge of the one who writes the strategy.
An algorithm provides an advantage with the right strategy,
But a poorly written algorithm can also cause significant losses in a very short time.
Therefore, information, strategy, and risk management are essential for us.