Roughly 85% of trades on the Australian Securities Exchange are now executed by algorithms rather than by humans clicking buttons. That figure shapes everything about how the modern ASX behaves — from the speed of price discovery to the texture of intraday volatility to what edges actually exist for retail traders. The good news for Australian retail traders is that algorithmic trading isn’t the villain it’s often made out to be. The bad news is that pretending it doesn’t exist puts you at a disadvantage. This is the plain-English explanation of what 85% algorithmic actually means, and how to think about your own trading with it firmly in mind.
What “85% algorithmic” actually means
The figure refers to the share of trade execution — orders matched on the exchange — that’s driven by automated systems rather than human discretion at the moment of the click. It captures a wide range of activity:
- Market-making firms providing liquidity on both sides of every traded security.
- Institutional investors executing large orders through algorithms that slice them into smaller pieces to minimise market impact.
- Index fund rebalancing flows that hit the market mechanically at known times.
- Quantitative hedge funds running statistical arbitrage and short-term momentum strategies.
- High-frequency trading firms making thousands of orders per second across the order book.
It’s not 85% of dollar volume, and it’s not 85% of capital being deployed. It’s the share of order flow being managed by code rather than by a person making each decision in real time. The capital direction is still set by humans — algorithms are the execution layer, not the strategy layer.
Why the shift happened
Three forces drove the move from human execution to algorithmic execution over the past two decades.
First, costs. A human trader filling a large order one click at a time is slow and expensive. An algorithm executes faster, with consistent risk controls, and at a fraction of the cost. Once institutional desks had algorithmic execution available, the economics made the shift inevitable.
Second, market structure. Australian markets are now electronic, fragmented across multiple venues (the ASX itself plus alternative venues like Chi-X), and operating in microseconds. No human can monitor every venue simultaneously. Algorithms can.
Third, regulation. Best-execution rules require brokers to seek the best available price across multiple venues. The only way to comply consistently is to run smart-order-routing algorithms that scan venues in real time.
What it changed about how the market behaves
The shift to algorithmic execution has produced four observable changes in ASX behaviour.
Tighter spreads
Bid-ask spreads on liquid ASX stocks are narrower than they were a decade ago. Market-making algorithms compete to be at the top of the order book, and that competition compresses the price you pay to transact.
Faster price discovery
News breaks, prices adjust, the new equilibrium is established in seconds. The days when a retail trader could read a press release at 9am and trade comfortably on the news at 10am are gone. By 10am the move has already happened.
Different intraday texture
The pattern of trading through the day has changed. Volume clusters around the open, the close, and around major data releases. The middle of the session can be unusually quiet, then suddenly bursty when a news headline or rebalance flow hits.
More overshoots and reversals
Momentum algorithms react to short-term price action, which can amplify moves before mean-reversion strategies pull prices back. The result is more frequent overshoots followed by reversals than you’d see in a market dominated by human discretion.
What it doesn’t mean for retail traders
The 85% figure gets used to justify two pieces of advice that don’t quite hold up.
“You can’t compete, so don’t trade.” Retail traders aren’t competing with HFT firms at the microsecond level. They’re operating at completely different timeframes. A retail position held for days or weeks isn’t won or lost in microseconds; it’s won or lost on whether the underlying view is correct.
“The algorithms control everything.” Algorithms execute. They don’t decide. Capital flows are still driven by human portfolio managers, retail investors, central bank policy, and economic data. The algorithms make the execution efficient; the decisions are still human.
The truthful picture is more nuanced: algorithmic markets are faster, tighter, and less forgiving of slow reactions to news. But they’re also more efficient — which means retail traders who think in days and weeks rather than microseconds operate on a different layer entirely.
What it means for retail traders
Five practical implications.
- Don’t try to outrace news. By the time you’ve read the headline, the move has happened. Retail traders win by anticipating themes and positioning ahead of catalysts, not by reacting to flashes.
- Use limit orders, not market orders. Market orders in an algorithmic environment can fill at the worst price in a sudden move. Limit orders give you control over the price you pay.
- Mind the opening auction. The first ten minutes of the ASX session see disproportionate volatility as overnight news clears. Either trade them deliberately or wait until the dust settles.
- Expect overshoots. If a stock moves sharply on news, the move often overshoots before settling. Patient traders who wait for the reversal often get a better entry than those who chase the initial move.
- Consider AI-assisted tools on your side. If 85% of the order flow is algorithmic, having tools that read order flow, news, and sentiment in real time levels the playing field on the execution layer. The strategy is still yours; the execution catches up to professional standards.
AI trading as the retail equaliser
This is the genuine pitch for retail AI trading platforms. Not “the AI will pick winners better than you can.” That’s marketing. The honest pitch is more modest and more useful: an AI-assisted platform handles the execution layer at a speed and consistency that matches the algorithmic flow you’re trading against. You bring the strategy and risk preferences. The platform handles the parts of trading that humans aren’t well-suited to in a market dominated by automated execution.
That’s a tool, not a magic solution. It works best for traders who already have a defined approach and want to apply it consistently without sitting at the screen all day. It doesn’t replace judgement about what to trade, when, or in what size.
The takeaway
Algorithmic execution is now the default state of the ASX, not the exception. That’s been true for years and is unlikely to reverse. The retail traders who do well in this environment are the ones who understand the texture algorithmic execution creates — faster price discovery, more overshoots, tighter spreads — and either operate at timeframes where it doesn’t matter, or use their own automated tools to match the standard.
For more on how AI trading compares to copy trading and manual decisions, see our decision guide. For the regulatory framework around AI trading platforms in Australia, see our ASIC piece. To see how Impulse Cashholm sits inside this picture, visit How It Works or the FAQ.
Trading and investing involve risk, including the possible loss of capital. Past performance is not a reliable indicator of future results. Information on this page is general in nature and does not constitute financial advice.