High Frequency Trading (HFT)

Definition:

Refers to computerized trading using proprietary algorithms. There are two types high frequency trading. Execution trading is when an order (often a large order) is executed via a computerized algorithm. The program is designed to get the best possible price. It may split the order into smaller pieces and execute at different times. The second type of high frequency trading is not executing a set order but looking for small trading opportunities in the market. It is estimated that 50 percent of stock trading volume in the U.S. is currently being driven by computer-backed high frequency trading. Also known as algo or algortihmic trading.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

Term of the Day

Thrift institution

An organization formed as a depository for primarily consumer savings. Savings and loan associations and savings banks are thrift institutions.

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