While the word ‘algorithm’ may be widely used in the digital age, few of us appreciate just how influential these entities are in everyday life. You may also be surprised to know that algorithms represent a mathematical concept whose roots date back to 600AD, following the invention of the decimal system.
This technology is constantly in the news too, and most recently a group of minicab drivers launched a legal bid to uncover the secret computer algorithms used by Uber to manage their workload.
But what exactly are algorithms and which technologies underpin them, and how do we benefit from this type of innovation in the modern age?
What is an Algorithm and What are the Most Common Examples?
As the digital age has evolved, scientists have begun to understand concepts such as machine learning and the capacity of computers to organise and execute tasks independently.
This has led to the development of increasingly complex and sophisticated algorithms, which are actually little more than an ordered list of finite mathematical instructions. Most commonly, they’re used to perform a range of tasks and solve problems, and they have a wide range of everyday applications that may well surprise you.
While you may not realise it, you will have also grown up utilising algorithms while learning mathematics and science. For example, long division is actually a standard division algorithm, as it provides a list of relatively simple instructions that enable you to divide multi-digit numbers by hand.
On a fundamental level, even certain recipes can be described as algorithms, as they serve as an ordered and timed list of specific instructions that must be followed closely. This is one of the many reasons why baking is often described as a science, and one that requires meticulous attention to detail.
In the modern age, algorithms are also applied for the purposes of data processing and automated reasoning, making them central to contemporary technologies such as big data and (most importantly) AI.
The Role of Algorithms in Financial Trading
Arguably, AI is the single biggest algorithmic application in 2020, particularly when you consider its capacity to process huge swathes of data and drive more complex tasks in the world of financial market trading.
This is particularly relevant in the case of the forex market, and the introduction of algorithmic has helped investors to optimise the number of orders that they execute and minimise the impact of human error.
This certainly affords traders an advantage in terms of speed and accuracy, and while there may be concerns associated with an over-reliance on automated trades and the prevalence of high-frequency trading, there’s no doubt that algorithms have revolutionised the forex market over the course of the last decade.
In this respect, high-speed algorithms are also central popular forex trading apps such as the MetaTrader 4, which enable investors to place orders on the move and execute a high volume of trades in real-time.
On balance, there’s little doubt that algorithms have changed financial market trading for the better, while it’s hard to overestimate the impact that they’ve had on our everyday lives.