High-frequency trading (HFT) is a form of algorithmic trading in which extremely large numbers of orders are placed, modified, or canceled within very short time frames. The holding period of individual positions often ranges from milliseconds to seconds.
HFT systems use high-performance hardware, ultra-fast data connections, and sophisticated algorithms to exploit very small price differences or market inefficiencies.
High-frequency trading accounts for a significant share of total trading volume on many exchanges. It is widely discussed because, on one hand, it contributes to liquidity provision and tighter spreads, while on the other hand raising concerns about market stability and fairness.
HFT requires substantial investment in technology and infrastructure and is therefore mainly used by institutional market participants.
