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What is high-frequency trading?

What is high frequency trading?

Critics of high-frequency trading, including Mark Cuban and author Michael Lewis, have recently brought this risky, powerful trading into the spotlight. In May 2010, when the Dow dropped more than 1,000 points (and regained them) in less than 20 minutes, this "flash crash" was largely attributed to high-frequency trading.

High-frequency trading is the use of a highly sophisticated computerized trading offering an edge to those who use it. Computer algorithms take a look at a variety of factors including economic reports and news headlines to make split-second determinations.

Currently, the high-frequency market makers have not been regulated and that has brought with it a variety of controversy and legal concerns.