Why Execution Speed Matters in Modern Markets
In today’s financial markets, where microseconds can determine profit or loss, speed is no longer optional. Low latency trading vs high frequency trading is a hot topic for modern traders.
Both strategies rely on lightning-fast execution, but they’re not identical. So, how do they differ? And where does algorithmic trading fit in?
This article explains the difference between these advanced strategies, with a focus on their relevance for retail traders exploring automated options trading.
What is High-Frequency Trading (HFT)?
High-frequency trading is a type of algorithmic trading that uses powerful computers and high-speed data feeds to execute trades in fractions of a second. The goal is to profit from minuscule price movements.
- Speed: Trades executed in microseconds
- Infrastructure: Uses low latency networks and co-location with exchanges
- Automation: Fully reliant on high-frequency algo trading systems
Examples include market-making and arbitrage by firms like Citadel and Virtu Financial.
What is Algorithmic Trading?
Algorithmic trading is a broader term that refers to the use of computer code and rules-based models to trade. It is less about speed and more about strategy.
Common uses: trend following, mean reversion, and rebalancing
Execution: time-based or volume-weighted average price (TWAP/VWAP)
Accessibility: popular with retail traders using platforms like Thinkorswim
Algorithmic trading is often used interchangeably with high frequency algorithmic trading, though not all algos run at high speed.
Low Latency Trading Explained
While often linked, low latency trading and high frequency trading are not the same:
- Low latency trading refers to minimising the time it takes to send and receive market data and orders.
- High frequency trading is a strategy that depends on that low-latency infrastructure to operate.
In a nutshell, not all low-latency traders are HFT firms, but all HFT firms rely on low latency.
Algorithmic Trading vs High Frequency Trading
These terms are often confused. Here’s a quick comparison:
Feature | Algorithmic Trading | High-Frequency Trading |
Speed | Milliseconds to hours | Microseconds |
Purpose | Execution & strategy | Exploit inefficiencies |
Infrastructure | Moderate | Co-location / ultra-low latency |
Accessibility | Retail & institutional | Primarily institutional |
What Low Latency Really Means for Retail Traders
When retail traders hear ‘low latency,’ many imagine institutional setups with microwave towers, co-located servers, and microsecond execution. But the reality is simpler: you don’t need institutional-grade latency to trade options profitably, especially when using defined-risk SPX and SPY spread strategies.
For institutional HFT firms, execution speed determines whether they capture a one-cent arbitrage opportunity before someone else. For retail automation, latency is about reliability, not raw speed.
- Institutional HFT: co-location, microwave links, FPGA hardware
- Retail automation: broker API efficiency, routing quality, and stable execution
- Real impact: 0.5–2 seconds matters for scalping bots, but not for 3–30 DTE SPX spreads
Automation for credit spreads hinges on getting clean, consistent fills, not microseconds.
This is why our Weekly Trend and Monthly Trend services optimize for execution quality rather than pure speed. using stable broker APIs and liquidity-driven routing rather than HFT infrastructure.
Latency in Options Trading: Why Fill Quality Matters More Than Speed
Options behave differently from single-leg stock orders. A multi-leg SPX/SPY spread depends on several moving parts, including bid–ask spreads, market depth, and how each broker routes and synchronises legs.
This is where latency matters, but not in the HFT sense.
The real questions for options automation are:
- Did the broker route the spread efficiently?
- Did the legs fill together?
- Did the limit order stay competitive in a fast-moving book?
For retail traders, microsecond latency is irrelevant. What matters is reducing slippage and ensuring reliable fills.
Brokers like Tradier and Interactive Brokers provide:
- consistent API response times
- intelligent spread routing
- reliable multi-leg processing
- robust limit order handling
Example: If you send a credit spread at a $1.80 limit, the spread may shift between $1.75 and $1.90 during routing. Stable latency reduces the chance of mid-route widening and improves fill probability, without needing HFT-level speed.
For SPX/SPY spread traders, latency stability is preferable to latency speed.
High Frequency Trading Trends in 2025
In 2025, high frequency trading trends include increased use of AI for order flow prediction and tighter regulation globally. More firms are also exploring hybrid models combining HFT and traditional algorithmic strategies.
2025 Trends in Execution & Automation
Several emerging trends are shaping both institutional and retail execution environments:
- AI-assisted order execution. Machine learning now helps optimize routing paths, minimise slippage, and predict micro-structure behaviour. Retail traders benefit indirectly as brokers integrate similar technology.
- Hybrid automation models. Modern strategies blend rule-based systems with AI-driven filters. Even retail automation uses structured signals supported by risk-sensitive machine learning.
- Growth of retail automation platforms. Broker APIs, no-code workflow tools, and services like Global AutoTrading make systematic trading widely accessible.
- Tighter regulations. The SEC and ESMA continue to expand oversight of algorithmic and high-speed trading, improving execution transparency and reducing predatory practices.
These trends strengthen stability and execution quality without requiring institutional equipment.
High Frequency Trading Algorithmic Strategies
Popular algorithmic strategies used by HFT firms include:
- Latency arbitrage
- Statistical arbitrage
- Quote stuffing and spoofing (now heavily regulated)
Retail traders can implement simplified versions through rule-based bots without needing ultra-low latency.
Technology Stack: What Powers Low Latency?
Successful HFT and low-latency setups use fibre-optic networks, microwave transmission, FPGAs, and co-location. Retail traders don’t need this stack.
Instead, they should focus on brokers with reliable APIs and strong automation support.
Retail vs Institutional Infrastructure: A Clear Comparison
Feature | Institutional (HFT) | Retail Automation |
Execution speed | Microseconds | Milliseconds to seconds |
Infrastructure | Co-location, FPGA servers, microwave links | Cloud brokers & API routing |
Typical strategies | Arbitrage, market making | Credit spreads, condors |
Key risks | Flash crashes, over-hedging | Slippage, misrouting |
This table highlights why HFT conditions don’t apply to retail traders. The goals and risks are completely different.
Which Strategy is Right for You?
Unless you have access to institutional infrastructure, high-frequency trading isn’t the right path. But algorithmic trading can be extremely effective when paired with consistent signals and proper risk controls.
That’s why our Weekly Trend service offers pre-built signals for SPX/SPY credit spreads, tailored for retail traders who want an edge—without writing a line of code.
Automate Your Edge with Weekly Trend
Join hundreds of traders using our credit spread signals on SPX and SPY. Fully automated. No naked options. No guessing.
FAQs
What is the difference between HFT and algo trading?
- HFT is a subset of algo trading focused on speed. Not all algo trading is high frequency.
Is high-frequency trading legal?
- Yes, but it’s closely regulated due to past abuses and flash crashes.
Can retail traders do low-latency trading?
- Not realistically—it’s expensive and requires special infrastructure.
What are examples of algorithmic trading strategies?
- Trend following, mean reversion, and volatility breakouts are common strategies.
