Open course in high-frequency trading
High-Frequency Trading Explained
What is high-frequency trading? A plain account of what HFT firms do, how market making and arbitrage earn small amounts many times a day, why speed matters, and what the evidence says about its effect on markets.
What is high-frequency trading? It is a style of automated trading in which positions are held for seconds or less and decisions are made in microseconds. It accounts for a large share of trading on major electronic exchanges, and it is widely discussed and often misunderstood.
What is high-frequency trading, exactly?
There is no legal definition everyone agrees on. In practice, HFT firms trade their own money, hold positions very briefly, end most days with little or no inventory, and compete on the speed and cost of their systems. Most of their trading is market making: standing ready to buy and sell, and earning the difference.
Is high-frequency trading good or bad for markets?
The research is mixed. Many studies find that electronic market making narrowed spreads for ordinary investors. Others point to liquidity that disappears in stress, as during the flash crash of 6 May 2010, and to speed races that cost more than they return. This course sets out the main arguments and the evidence behind them.
Where does this course lead?
It is the free starting point of the high-frequency trading track. Limit Order Books is the next step, then execution algorithms and the researcher-level HFT courses.
What you will be able to do
- Explain what high-frequency trading is and what it is not.
- Describe how market making and latency arbitrage earn money.
- Explain colocation and why microseconds matter for some strategies.
- Summarise the main arguments for and against HFT.
Syllabus, module by module
What HFT is
Short holding periods, many orders, small profits per trade, and automated decisions.
How HFT firms earn money
Market making, arbitrage between venues and related instruments, and exchange rebates.
Speed
Colocation, microwave links and why being second is often worth nothing.
The debate
Liquidity, spreads, the 2010 flash crash, and the rules that followed.
How the certificate is earned
Self-check questions at the end of each lesson. The course is not assessed. Completing every lesson earns a Certificate of attendance, which states that the course is not assessed. Read how certification works.
Questions applicants ask
How do high-frequency traders make money?
Mostly by market making: offering to buy slightly below and sell slightly above the market price, many thousands of times, and earning the spread when both sides fill. Some also trade on short-lived price differences between venues or related instruments.
Can an individual do high-frequency trading?
Not in the sense used by professional firms. Competitive HFT needs colocated servers, direct exchange connections and specialised engineering. The course explains what each of those costs and why.