Ultrafast Trading

AAA

DEFINITION of 'Ultrafast Trading'

A lucrative and highly competitive method of stock trading that uses special software that works in milliseconds to make trades in reaction to market changes. This type of trading has been criticized for worsening stock swings and for unfairly manipulating stock prices. The software's advocates say it improves trading efficiency.

Also known as "high frequency trading."

INVESTOPEDIA EXPLAINS 'Ultrafast Trading'

Ultrafast trading has also given rise to civil and criminal lawsuits because the highly paid programmers hired by Wall Street firms to develop the software, which takes years and costs millions in salaries alone, are believed to take the code with them when they switch companies, which is a great liablity to their former employers.

RELATED TERMS
  1. Manual Trading

    A trading system that involves human decision-making for entering ...
  2. Mobile Trading

    The use of wireless technology in securities trading. Mobile ...
  3. Flash Trading

    A controversial computerized trading practice offered by some ...
  4. Stock

    A type of security that signifies ownership in a corporation ...
  5. Trading Desk

    A desk where transactions for buying and selling securities occur. ...
  6. Hedge Fund

    An aggressively managed portfolio of investments that uses advanced ...
Related Articles
  1. Trading Strategies

    Introduction To Swing Trading

    This style, between day trading and trend trading, may be a good one for beginners to try.
  2. Trading Strategies

    Introduction To Momentum Trading

    This trading style offers major profit potential thanks to the powerful way in which momentum can drive a stock.
  3. Options & Futures

    The Importance Of Trading Psychology And Discipline

    Find out how investing success can be more about your mindset and less about the markets.
  4. Options & Futures

    Forecasting Market Direction With Put/Call Ratios

    Options are not only trading instruments but also predictive tools that can help us gauge the feelings of traders.
  5. Options & Futures

    Direct Access Trading Systems

    DATs can dramatically speed up order execution - find out how this system gives novice traders an edge.
  6. Options & Futures

    Prices Plunging? Buy A Put!

    You can make money on a falling stock. Find out how going long on a put can lead to profits.
  7. Mutual Funds & ETFs

    Five Janus Mutual Funds With High Alpha

    A look at some of the alpha-generating equity funds from Janus.
  8. Trading Strategies

    What is the Difference Between Institutional Traders and Retail Traders?

    The differences between retail and institutional traders lie in the size of the trade, level of sophistication, and the speed of transactions.
  9. Trading Strategies

    Top Day Trading Instruments

    Day trading is an intense and often appealing activity. Investopedia provides the list of top financial instruments for day trading.
  10. Investing

    Are Women Steadier Long-Term Investors?

    We look at the differences in behavior between male and female and found that women are steadier customers when it comes to following allocation advice.

You May Also Like

Hot Definitions
  1. Risk Averse

    A description of an investor who, when faced with two investments with a similar expected return (but different risks), will ...
  2. Fixed-Charge Coverage Ratio

    A ratio that indicates a firm's ability to satisfy fixed financing expenses, such as interest and leases. It is calculated ...
  3. Efficiency Ratio

    Ratios that are typically used to analyze how well a company uses its assets and liabilities internally. Efficiency Ratios ...
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Subsidy

    A benefit given by the government to groups or individuals usually in the form of a cash payment or tax reduction. The subsidy ...
  6. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
Trading Center