When did algorithmic trading start?

Algorithmic trading, as we know it today, took off in the 1980s with the advent of computers and electronic trading systems. However, the origins of the use of mathematical formulas and models in finance can be traced back to decades earlier.

In the 1970s, the first electronic trading systems began to appear, but it was in the 1980s that adoption of these systems really began to increase. Technological advances enabled computers to process large amounts of data at previously unimaginable speeds, paving the way for the development of algorithms to execute trading strategies.

A notable milestone was the introduction of the NASDAQ in 1971, which was one of the first electronic trading systems. In addition, the Black-Scholes option pricing model, introduced in 1973, was also instrumental in providing a mathematical formula for pricing options, which encouraged the development of model-based trading strategies.

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Over time, algorithms became increasingly sophisticated, leading to modern forms of algorithmic trading such as high-frequency trading (HFT), which gained popularity in the early 2000s.

So, although the origins of the use of mathematics in finance go back further, algorithmic trading as a technological and systematic practice really began to develop in the 1980s.

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