Program trading is casually defined as the use of computers in stock markets to engage in arbitrage and portfolio insurance strategies. More precisely, the New York Stock Exchange defines a program trade as a basket of stocks having either a total value of $1M (or more) and where the total number of stocks in the basket is 15 or greater. A Lego RCX Computer is an example of an embedded computer used to control mechanical devices. ... The examples and perspective in this article or section may not represent a worldwide view. ... In economics, arbitrage is the practice of taking advantage of a state of imbalance between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. ... In finance, a portfolio is a collection of investments held by an institution or a private individual. ... New York Stock Exchange (June 2003) The New York Stock Exchange (NYSE) , also nicknamed the Big Board, is the largest stock exchange in the world in dollar volume and second largest by number of companies listed. ...

Based on the definition above, it should be noted here that the term "program" in the context program trading is referring to a basket, portfolio or a collection shares or securities, rather than a computer program, contrary to a common misconception.

Program trades need to be specifically marked as such when submitted to the exchanges, and there are certain restrictions placed on programs that do not apply to non-program trades (NYSE rule 80-A, for example).

In recent times, there has been a subset of program trading called algorithmic trading. This is when a very complex computer program takes an order and breaks it up into very small pieces (typically 100-300 shares per piece) and gradually submits these pieces into the market. The goal is to trade quickly enough to get your order done before others "catch on" to what you're doing, and at the same time to trade slowly enough so that you do not impact the stock by "walking the book". Algorithmic trading is the use of very complex computer programs to trade financial instruments (e. ...

Through the 1970s and early 1980s, computers were becoming more important on Wall Street. They allowed instantaneous execution of orders to buy or sell large batches of stocks and futures. The 1970s decade refers to the years from 1970 to 1979, inclusive. ... The 1980s decade refers to the years from 1980 to 1989, inclusive, informally sometimes including the years 1979, 1990 and 1991. ... View up Wall Street from Pearl Street NYSE and Broad Street view from Wall Street Wall Street is the name of a narrow street in lower Manhattan running east from Broadway downhill to the East River. ...

The most popular explanation for the 1987 crash was selling by program traders. Many blamed program trading strategies for blindly selling stocks as markets fell, exacerbating the decline. DJIA (19 July 1987 through 19 January 1988) FTSE 100 Index (19 July 1987 through 19 January 1988) Black Monday is the name given to Monday, October 19, 1987, when the Dow Jones Industrial Average (DJIA) fell 22. ...

Program trading is extremely popular amongst hedge funds in which traders can partake in sophisticated strategies. Long or short positions are taken as desired technical conditions arise. Strategies are often based off of historical price activity. Computers allow traders to backtest their strategies on decades of historical data.

External links

• New York Stock Exchange "Circuit Breakers and Trading Collars"
• New York Stock Exchange program trading statistics