Forex glossary
High-frequency trading (HFT)
HFT is a group of algorithmic techniques using very low latency and many order messages, including modifications and cancellations. Strategies can include market making and arbitrage. It generally requires specialized infrastructure; the number of submitted orders is distinct from the number of completed trades.
Illustrative example
How does it work in practice?
Assume a system sends 1,000 quote updates in one second but completes only ten trades. The message count describes order-processing intensity; it does not mean 1,000 executed transactions or a profitable result.
A case to work through
Many cancellations, few executions
A hypothetical system sends 600 new orders and 580 cancellations; 12 trades execute.
- The messages include at least 1,180 submission and cancellation events.
- Twelve executions remain a separate measure; these counts do not establish profit.
What follows? Report event types separately.
Example boundary: Partial executions and modifications need their own data definitions.
Three different counts
Text description of the diagram
- Messages: Order submissions, modifications and cancellations.
- Executions: Trades or partial fills under the data definition.
- Outcome: Revenue and costs require separate calculation.
A useful distinction
High-frequency trading (HFT) / Algorithmic trading
HFT emphasizes very low latency; algorithmic trading also includes slower rule-based methods.
Check your understanding
Avoid confusing messaging activity with executed trading.
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Executions are separate from messages.
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Related terms
Sources and documentation
- SEC – HFT characteristics
Low-latency infrastructure and intensive order messaging as HFT characteristics.
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The example illustrates the mechanism. Check current account conditions and instrument specifications with the provider.