What is high Frequency Trading ?
In electronic financial markets algorithmic trading or automated trading, alsoknown as high
is the use of computer programs for enteringtrading orders with the computer algorithm deciding on aspects of the order suchas the timing, price, or quantity of the order, or in many cases initiating the order without human intervention.These Powerful algorithms execute millions of orders a second and scan dozens of public and private marketplacessimultaneously. They can spot trends before other investors can blink, changingorders and strategies within milliseconds. [
]High-frequency traders often confound other investors by issuing and thencanceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computerscan essentially bully slower investors into giving up profits and then disappear before anyone even knows they were there. High-frequency traders also benefitfrom competition among the various exchanges, which pay small fees that areoften collected by the biggest and most active traders typically a quarter of a centper share to whoever arrives first. Those small payments, spread over millions of shares, help high-speed investors profit simply by trading enormous numbers of shares, even if they buy or sell at a modest loss. high-frequency trading is widely used by pension funds, mutual funds, and other buy side (investor driven)institutional traders, to divide large trades into several smaller trades in order tomanage market impact, and risk. [
How does high frequency trading work ?
To understand High frequency Trading let’s examine when slow moving every day traders such as the general public sitting at home on their pc go up againstthese high frequency computers running these pre-set algorithms. It turns out to be a slaughter just like when the hump back whales open its enormous mouths tofeed and suck up every little fish in sight.