High-frequency trading (HFT) is the use of sophisticated algorithms and high-end hardware optimally located to gain an advantage in stock market trading.<\/span><\/p>\n High-frequency trading (HFT) is a type of algorithmic trading with characteristics of high speeds, high turnover rates. <\/span><\/p>\n Also, the high order-to-trade ratios that leverage high-frequency financial data and electronic trading tools. <\/span><\/p>\n There is no single definition of HFT. Among its key attributes are highly sophisticated algorithms, co-location. Above all, with very short-term investment horizons.<\/p>\n HFT can be a primary form of algorithmic trading in finance. Specifically, it is the use of sophisticated technological tools and computer algorithms to rapidly trade securities. <\/span><\/p>\n It can be used to either find the best price for a single large order. Or to find opportunities for profit in the market in real time.<\/span><\/p>\n In 2017, Aldridge and Krawciw estimated that in 2016 HFT on average initiated 10\u201340% of trading volume in equities. And 10\u201315% of volume in foreign exchange and commodities. <\/span><\/p>\n Intraday, however, the proportion of HFT may vary from 0% to 100% of short-term trading volume. <\/span> High-frequency traders move in and out of short-term positions at high volumes and high speeds. <\/span><\/p>\n Aiming to capture sometimes a fraction of a cent in profit on every trade. <\/span><\/p>\n HFT firms do not consume significant amounts of capital, accumulate positions. Or, hold their portfolios overnight, for instance. <\/span><\/p>\n As a result, HFT has a potential Sharpe ratio (a measure of reward to risk) tens of times higher than traditional buy-and-hold strategies. <\/span><\/p>\n High-frequency traders typically compete against other HFTs, rather than long-term investors. Such firms make up the low margins with incredibly high volumes of trades.\u00a0<\/span><\/p>\n The algorithms are extremely complex, allow the program to trade across several markets at once. <\/span><\/p>\n The advantage of HFT is in quickly processing trades. So the focus is on the power of computers used and location of computing programs.\u00a0<\/span><\/p>\n By placing themselves nearby to the exchanges taking orders, HFT firms can gain millisecond advantages over their rivals. In some trading, it can be of vital importance.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" DEFINITION of High-frequency trading (HFT) High-frequency trading (HFT) is the use of sophisticated algorithms and high-end hardware optimally located to gain an advantage in stock market trading. WHAT IT IS IN ESSENCE High-frequency trading (HFT) is a type of algorithmic trading with characteristics of high speeds, high turnover rates. Also, the high order-to-trade ratios that […]<\/p>\n","protected":false},"author":4,"featured_media":6958,"parent":3024,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"content-type":"","_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"footnotes":""},"class_list":["post-3389","page","type-page","status-publish","has-post-thumbnail","hentry"],"yoast_head":"\nWHAT IT IS IN ESSENCE<\/b><\/h4>\n
It uses proprietary trading strategies carried out by computers to move in and out of positions in seconds or fractions of a second.<\/span><\/h4>\n
\nPrevious estimates reporting that HFT accounted for 60\u201373% of all US equity trading volume. With that number falling to approximately 50% in 2012 were highly inaccurate speculative guesses.<\/span><\/p>\nHOW TO USE<\/b><\/h4>\n