Which type of trading approach focuses on controlled risks and costs?

The focus of algorithmic trading, which is the correct answer, is on utilizing algorithms to execute trades in a manner that minimizes risks and costs. Algorithmic trading systems use computer programs to automate the trading process, enabling traders to execute orders at optimal prices while managing risk effectively. These systems can react to market conditions much faster than a human trader, allowing for real-time adjustments to strategies in response to changing price movements or volatility.

Moreover, algorithmic trading can enhance efficiency by minimizing transaction costs, leveraging high-frequency trading strategies, and optimizing execution strategies that take advantage of market liquidity. By using predefined criteria and complex mathematical models, algorithmic trading helps control the level of risk taken by ensuring that trades are executed within the parameters set by the trader, potentially improving overall performance.

In contrast, speculative trading often involves higher risks and costs as traders bet on price movements without a strict risk management strategy. Value trading focuses on identifying undervalued securities without the specific emphasis on cost control. Traditional trading relies on manual execution of trades, which can lead to greater variability in costs and risk management effectiveness. Thus, the main virtue of algorithmic trading lies in its systematic approach to managing risks and costs efficiently.