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High-Frequency Trading

High-Frequency Trading Definition

High-Frequency Trading - HFT describes computerized trading strategies that use brief position-holding periods. Traders applying this method utilize complex algorithms to analyze the  markets and execute orders. Those who execute trades faster are more profitable than traders with  slower execution speeds. HFT accounts are applied for over half of the trading volume in the U.S.

High-frequency trading is the execution of computerized trading strategies characterized by unusually brief position-holding periods, in many cases taking advantage from microstructure inefficiencies. In high-frequency trading, programs analyze market data to utilize trading opportunities that may open up for only a fraction of a second to several hours. High-frequency trading, (HFT), uses quantitative investment computer programs to hold short-term positions in equities, options, futures, ETFs, currencies, and other financial instruments that possess electronic trading capability.

Additional meaning of High-Frequency Trading:

High-frequency traders compete on a basis of speed with other high frequency traders, not long-term investors (who typically look for opportunities over a period of weeks, months, or years), and compete with each other for very small, consistent profits.[As a result, high-frequency trading can be highly risky, due to the fact that a smaller trading timeframe can lead, as it is obvious, to extremely large drawdowns, due to repeated triggering of stop loss orders.

By 2010 High Frequency Trading accounted for over 70% of equity trades taking place in the US and was rapidly growing in popularity in Europe and Asia.

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