Algorithmic trading uses computer programs to follow predefined rules and instructions to buy and sell financial instruments like stocks at high speeds and frequencies that are impossible for humans. It involves computers programmed to rapidly process information like price, volume, and market data according to mathematical models and defined algorithms to identify trading opportunities and automatically make trades. An example is a program that buys a share priced at 100 rupees and automatically sells it when the price reaches 120 rupees, allowing it to invest in multiple companies simultaneously with very short average holding periods measured in seconds.