High-frequency trading is therefore based on Speed advantages. Requires advanced computer technology and a fast data line to the stock exchange. To achieve the latter expensive server capacity or Server installation places are placed in close proximity to the systems of the stock exchange operator, to get other investors before order delivery. The duration of an order delivery is now measured in nanoseconds. For example a trader placed a purchase order, it is possible this order with the purchase of the same title to preempt the high frequency trading. Having the price dynamics resulting from the sum of the two order could be benefited, the computer systems immediately repel the title normally. This process happens within an eyelash of shock, so that manual traders have not the slightest hint of a chance to win the fight against the machines.

Also benefits from its speed of high frequency trading in the electronic order books of the broker automatically placed in fake order are facing the direction of the market to a some points can be pushed in the desired direction. It, not the size of the market movement is crucial. Within half a second, tens of thousands of transactions can be handled in the high frequency trading. Adding countless Kleinstgewinne resulting per trade, come from the huge sums. In the United States alone, the Borsen-Zeitung estimates the profits of the companies involved up to $ 100 billion.

As the most important argument of the proponents referenced constantly on the liquidity provided to the markets through high-frequency trading systems. The operation itself but already shows that all remaining investors, without the elaborate technology, without the Middle Exchange server location the Jesuits data time advantage, only worse prices for buying and selling their securities can achieve. High frequency trading systems are based on mathematical formulas and react quickly to price movements. Is a strong market movement, regardless, whether they be justified by fundamentals can or is based on a simple manual entry errors in an order mask the computer and respond to ratchets up a price movement.

Tags: finances, stock exchange & stock markets

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