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A form of algorithmic trading where powerful computers buy and sell in fractions of a second, often thousands of times a day.
Why It Matters
High-frequency trading (HFT) is algorithmic trading taken to an extreme of speed. Firms place computers physically close to exchange servers to shave microseconds off the time an order takes to arrive. Most HFT profits come from tiny edges — a fraction of a cent per share — repeated across enormous volume, often through market making or short-lived arbitrage. It's effectively out of reach for individuals, but it shapes the market structure everyone else trades inside.
Key Points
- Algorithmic trading focused on extreme speed — microseconds matter
- Earns tiny per-trade edges multiplied across huge volume
- Dominated by specialized firms; not a retail strategy
Related Terms
Common Questions
A form of algorithmic trading where powerful computers buy and sell in fractions of a second, often thousands of times a day. High-frequency trading (HFT) is algorithmic trading taken to an extreme of speed. Firms place computers physically close to exchange servers to shave microseconds off the time an order takes to arrive.
High-frequency trading (HFT) is algorithmic trading taken to an extreme of speed. Firms place computers physically close to exchange servers to shave microseconds off the time an order takes to arrive. Most HFT profits come from tiny edges — a fraction of a cent per share — repeated across enormous volume, often through market making or short-lived arbitrage. It's effectively out of reach for individuals, but it shapes the market structure everyone else trades inside.
Algorithmic trading focused on extreme speed — microseconds matter
Earns tiny per-trade edges multiplied across huge volume
Dominated by specialized firms; not a retail strategy