#25: High-frequency trading
by Tomasz Nurkiewicz
According to some estimates, even half of the trading volume in the American stock exchange is generated by computers. Specifically, computer programs that make trading decisions in a split of a second. They may buy stock to sell it a few milliseconds later. With very minimal profit, this process repeated thousands of times per day can make a solid return. How do such systems work? There are multiple strategies, but most of them require extremely fast algorithms running close to the physical stock exchange. The speed is crucial and that’s what makes HFT so interesting. A trading bot can easily read social media and within microseconds decide whether particular news is good or bad. That can lead to a stock going up or down. For example, a president tweets about a new special tax relief for the pharmaceutical industry. A computer program almost instantaneously buys some stocks from the pharma companies and sells them seconds later. Before other computers do the same. Human traders stand no chance.
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