High-frequency trading uses computers to analyze markets and make lightning-fast trades, aiming to profit from tiny price movements, here are many things to know.
1
Relies on super-fast computers and complex algorithms to make a huge number of trades in milliseconds.
2
These algorithms analyze vast amounts of market data in real-time to identify and capitalize on tiny price discrepancies.
3
HFT focuses on very short-term investment horizons, entering and exiting positions within seconds or fractions of a second.
4
Specialised hardware and low-latency networks are crucial for HFT firms to achieve the highest possible speed.
5
HFT firms often act as market makers, placing buy and sell orders to tighten bid-ask spreads and earn profits from the difference.
6
HFT can add liquidity to markets by increasing the number of orders, but some argue this liquidity is fleeting.
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HFT raises concerns about fairness for slower investors and the potential for market manipulation due to its high speed and complexity.