High Frequency Trading
High-frequency trading (HFT) uses powerful computers and algorithms to execute thousands of trades per second, profiting from tiny price discrepancies. HFT firms invest heavily in speed advantages, including co-located servers and microwave transmission lines.
Understanding the Concept
• Trades held for milliseconds to seconds, rarely minutes • Profits from arbitrage, market making, and order flow analysis • Controversial: adds liquidity but may disadvantage retail traders • Requires significant capital and technology investment
Real-World Example
An HFT firm detects that Apple stock is $150.01 on NYSE and $150.02 on NASDAQ. Their algorithm buys on NYSE and sells on NASDAQ in microseconds, pocketing $0.01 per share risk-free. Multiply by millions of shares daily across thousands of stocks, and small profits become massive returns.
How Strykr Helps
Strykr's AI assistant helps you understand and apply High Frequency Trading concepts to your trading. Get personalized guidance and real-time market analysis to make better decisions.
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