High Frequency Trading – How does it Take place?

In the earlier days of the 20th century, Stock trading used to be a straight forward business only for the banks and powerful corporations on the Wall Street where sellers and buyers used to come together at the floor of stock exchange. They would then spend hours going back and forth until they would reach a deal suitable for both parties. However, since the creation of the internet and computers, things have changed.

The year of 1998 was deemed as the turning point of this sector when electronic commissions were given the allowance to open the financial trading market to everyone. This meant that with the help of just a desktop computer or laptop and a stable internet connection, anyone from anywhere in the world can trade in the financial trading market without any issues from the comfort of their office or home.

Double-time to today, online trading of stocks and crypto has become so high-tech that trades can be done in just a few milliseconds. One of the ways to do so is using High frequency trading!

Here, many powerful high speed computers are used to execute trades at lightning speed. This most certainly helps them in making millions of dollars in just a few seconds if not milliseconds.

Assuming that you are interested in online trading of stocks, let me tell you how high frequency trading works.

To start off, you must buy a chunk of stocks; later dividing them into smaller batches, this will help you a lot in avoiding undue attention to your personal trades. In just a few seconds or minutes, you will easily be able to find many interested traders from all around the globe who are ready to buy your stock or even issue buy orders. This is the part where high frequency computers come to work; these super fast computers intercept any kind of order that you place and then act upon the requests very quickly within 0.03 seconds. I know what you are thinking, “will we get to confirm the trades?”

 The answer is yes! These super fast computers before executing the trade allow you to check and confirm the trades in a small screen so that you know where the order is going, the best part about all this being that this is completely legal!

However, since high frequency trading is already very popular amongst the traders, the competition is very high. Many of these traders who are involved in high frequency trading since the beginning already know what you are looking forward to buy, these traders then buy up the stocks you are looking for and by the time you place your order, they turn around and sell their stocks to you making them a profit. “There must be a way to stop this, right?” Well, since all of this happens within a fraction of second, it can be quite a difficult job to determine what happened and how it happened so I would consider moving on and focusing on your own trades.

You can learn more about high frequency trading and stock trading at https://arya.xyz/en/blog/insights/all-about-high-frequency-trading