A sub-set of algorithmic trading. High frequency trading is characterized by a very large number of orders for individual trades of very small size done at extremely high speed.
What is High Frequency Trading (HFT)?
High frequency trading (HFT) is a type of algorithmic trading that uses complex computer algorithms to execute trades in financial markets at high speeds and on a large scale. The goal of high frequency trading is to take advantage of small price differences in financial assets, such as stocks, bonds, and futures, by executing a large number of trades in a short amount of time.
HFT firms typically use advanced technologies, such as high-speed computers and low-latency networks, to analyze vast amounts of market data and execute trades in milliseconds. This allows HFT firms to make trades faster and with greater precision than traditional traders, who might take minutes or even hours to execute a trade.
High frequency trading has become an increasingly popular and controversial activity in financial markets, with some proponents arguing that it helps to increase market liquidity and make prices more efficient, while others argue that it can contribute to market instability and increase the risk of flash crashes.
Overall, high frequency trading is a complex and rapidly evolving area of finance that has important implications for financial markets and the broader economy. It is often a topic of debate among economists, regulators, and investors, and is closely watched by market participants and policymakers.
