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Going Algo: When and If Be careful when the whip comes down

Traders Magazine, June 2006

Joseph Saluzzi

While algorithmic trading systems are designed to provide a fast, anonymous and cost-effective means of executing block trades, traders are finding that algos often require careful oversight and a feel for when to use them and, even more importantly, when not. Most professionals know that algo systems, at least in the case of the "first-generation" products widely used today, work best for large-cap stocks with millions of shares in average daily volume. What is not commonly known though, but is a fact that more and more traders and asset managers are discovering, is that even some of the Street's most popular large caps, ones with seemingly high liquidity, are actually not good candidates for algo trading.

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