High-frequency trading (HFT) operates in microseconds — millionths of a second — where firms invest hundreds of millions in technology to shave nanoseconds off execution speed. HFT firms like Citadel Securities, Virtu Financial, Jump Trading, and Jane Street account for roughly 50% of all U.S. equity trading volume. These aren't investors with views on whether Apple is overvalued — they're technology companies that happen to trade financial instruments, earning tiny profits on each trade but executing millions per day. A typical HFT firm holds positions for seconds to minutes, ending each day with zero overnight exposure.

The primary HFT strategies are electronic market making, statistical arbitrage, and latency arbitrage. Electronic market makers continuously post bids and offers across thousands of securities, earning the bid-ask spread while managing inventory through real-time models. Virtu Financial reported only one losing day in over 1,200 trading days — diversification across thousands of instruments makes market making nearly riskless at scale and speed. Latency arbitrage exploits tiny price discrepancies between exchanges that exist because information doesn't travel instantaneously — if a buy order lifts the offer on NYSE, an HFT firm can race to buy the still-stale offer on another exchange before it updates.

The infrastructure is staggering. Co-location means renting server space inside exchange data centers. Microwave towers connect Chicago to New Jersey faster than fiber optic cables because signals travel at the speed of light through air versus two-thirds that speed through glass. FPGA chips process market data in hardware rather than software, achieving nanosecond-level decisions. The arms race is so extreme that Spread Networks spent $300 million on a fiber line 100 miles shorter than existing routes to save 1.4 milliseconds. These barriers to entry explain why HFT has consolidated to a few dozen dominant firms.

The debate around HFT's market impact is nuanced. Proponents point out that bid-ask spreads have fallen from 6+ cents to about 1 cent on S&P 500 stocks, clearly benefiting all investors. Critics, inspired by Michael Lewis's 'Flash Boys,' argue HFT creates a two-tiered market where speed advantages systematically extract value from slower participants. The May 2010 Flash Crash showed that HFT liquidity can vanish precisely when markets need it most — the Dow dropped 1,000 points in minutes. For the average trader, the practical takeaway: HFT has made normal trading cheaper but volatile moments more dangerous. Use limit orders to protect yourself.