• High Frequency Stock Trading

  Filed under Finances
  Jul 28

  High frequency stock trading is the latest tactic used to make money on wall street by large hedge funds and high volume brokers. Those trading at high frequency complete stock transactions in a less than a hundredth of a second using sophisticated computers and algorithms. This strategy makes it possible to benefit from tiny swings in stock prices throughout the day. The question has been raised if this is a fair trading practice or simply a way large brokers exploit the little guy and the market as a whole.

  It is estimated that just 40 out the 20,000 firms trading stock use this method, yet high frequency trading is estimated to account for 46% of the trading volume on a typical day on the NYSE. This leads one to question if this strategy is explotive. High frequency stock trading has helped in a large part to double daily stock volume since 2000. In the late nineties stocks changed from being measured by eighths of a dollar to pennies. This change made high frequency trading a lucrative business. Changes in stock prices are so tiny now that with high volume these brokers can take advantage of small swings in the prices.

  Advocates of the practice contend that there is much more to high frequency stock trades than meets the eye. One must still understand and study potential trades. Either way high frequency trading remains a hot topic on wall street.

  Tagged as: high frequency stock trading
  
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