Algorithmic TradingAlgorithmic Trading in Ireland

Everything you need to know about algorithmic trading from Ireland

The investment industry in Ireland has evolved dramatically over the last several decades and continues to do so amid increased competition, technological advances, and a challenging economic environment. 

According to Investopedia Algorithmic trading makes use of complex formulas, combined with mathematical models and human oversight to make decisions to buy or sell securities on an exchange. Algorithmic trades often make use of high-frequency trading technology, which can enable a firm to make tens of thousands of trades per second. It is a method of executing orders using automated pre-programmed trading instructions accounting for a variety of fundamental, technical and market data. It relies on computer programs that execute algorithms to automate some or all elements of a trading strategy. They can take many forms and facilitate optimisation throughout the investment process, from idea generation to asset allocation, trade execution, and risk management.

The trends that have propelled trading Algo’s to their current prominence in Ireland and all over the world include:

  • Changes in the market microstructure, such as the spread of electronic trading.
  • The development of investment strategies framed in terms of risk-factor exposure, as opposed to asset classes.
  • The revolutions in computing power, data generation and management, and statistical methods.
  • The outperformance of the pioneers in trading Algo’s relative to human, discretionary investors

The track record and growth of assets under management (AUM) of firms that spearheaded algorithmic trading has played a key role in generating interest. D.E.Shaw($50 Billion AUM), Citadel($32 Billion AUM), and Two Sigma($60 Billion  AUM), three of the most prominent quantitative hedge funds that use systematic strategies based on algorithms, rose to the all-time top-20 performers for the first time in 2017, in terms of total dollars earned for investors, after fees, and since inception. 

Similarly, on the Institutional Investors 2018 Hedge Fund 100 list, the four largest firms, and five of the top six, rely largely or completely on computers and trading algorithms to make investment decisions – and all of them have been growing their assets in an otherwise challenging environment. Measured by the Russell 3000 index, the value of US stocks is around $31 Trillion.   The three types o computer managed funds control 35% whereas human managers at traditional hedge funds just 24%.

Traders pursue a range of different objectives when using algorithms to trade:


  • Trade execution algorithms that aim to achieve favourable pricing.
  • Short-term trades that aim to profit from small price movements.
  • Behavioural strategies that aim to anticipate the behaviour of the other market participants
  • Trading strategies based on absolute and relative price and return predictions.


One of the main reasons that this type of trading has become so popular even in Ireland is because of the advantages it has over manual trading, such as:

  • Speed – The algorithmic trades are executed automatically, and trades are made in fractions of a second, faster than humans can perceive. Algorithms can scan and execute on multiple indicators at the same time and at a speed no human can match.
  • Accuracy – As the computer is automatically executing the trades it avoids the pitfall of accidentally putting in the wrong trade which can happen with humans
  • Emotions – Trading can be very emotive. The Algorithm removes the human emotions trades a constrained within a set of predefined criteria. Thus is a huge advantage as humans trading are susceptible to emotions that can lead to irrational decisions.  The two main human emotions that lead to bad trading decisions are fear, and greed
  • Back testing – It can to tough for traders to know what parts of their trading system work and what parts do not as the cannot run their system on past data.  However algorithmic trading can be run based on past data to see if it would have worked in the past. This ability provides a huge advantage as it allows the trader to remove any flaws in the system before running it live.

The portion of investors/trader trading 80% or more of their portfolio via algorithmic trading doubled from 2020 to 2021. In the US, algorithmic trading accounts for anywhere between 80-85% of trading on the exchanges. In the coming years, Algo will capture 95% of market share with increasing volumes. Algorithmic trading watches the market so you don’t have to, it is most definitely the future!

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