Understand how speed, strategy, and technology shape modern trading—and how you can benefit without a data center.
Why the Speed of Execution Matters
In today’s financial markets, where microseconds can determine profit or loss, speed is no longer optional. Low latency trading and high-frequency trading (HFT) dominate headlines, but are they the same? 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 vs High Frequency Trading
While often linked, low latency trading and high frequency trading are not the same:
- Low latency trading refers to minimizing 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.
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 market inefficiencies |
| Infrastructure | Moderate | High-end / Co-location |
| Accessibility | Retail & institutional | Primarily institutional |
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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.
High Frequency Trading Algorithmic Strategies
Popular algorithmic strategies used by HFT firms include:
- Latency arbitrage
- Statistical arbitrage
- Quote stuffing and spoofing (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:
- Fiber-optic networks & microwave transmission
- FPGAs for ultra-fast computation
- Server co-location near NYSE/CBOE data centers
Retail traders don’t need this stack. Instead, focus on automation tools like Tradier + our signals.
Regulations & Risks
Both HFT and algorithmic trading carry risks:
- HFT Risks: Market manipulation, flash crashes, data center dependency
- Algo Risks: Strategy flaws, overfitting, misfiring trades
Agencies like the SEC and ESMA continue to refine oversight in 2025.
Explore the pros and cons of automated vs manual trading in this dedicated guide.
Which Strategy is Right for You?
Unless you have access to institutional infrastructure, high-frequency trading is not the right path. However, algorithmic trading can be very effective if combined 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.
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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.
