Algorithmic Trading in UK Markets: Microstructure-Driven Signal Design and Execution Optimisation
Algorithmic trading has evolved far beyond simple rule-based systems reacting to price movements. In today’s UK markets—where liquidity fragments across venues, spreads compress and competition intensifies—successful algorithms must operate at a deeper level. They need to understand how prices form, how orders interact, and how execution itself shapes outcomes. This is where market microstructure becomes not just an academic concept, but a practical foundation for robust trading systems.
For British traders and portfolio managers deploying algorithms across equities, FX, futures, and derivatives, the edge increasingly lies in precision. Precision in signal design, precision in execution, and precision in risk control.
Designing Signals from Order Flow and Liquidity
Microstructure-driven signal design begins with recognising that price is the outcome of trading pressure. Order flow—the balance between aggressive buyers and sellers—often contains more immediate information than price alone.
In UK equity and FX markets, algorithms increasingly monitor metrics such as:
- Trade initiation
