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What is high-frequency trading (HFT) in forex?

High-frequency trading (HFT) uses algorithms and advanced technology to execute thousands of trades in fractions of a second. HFT strategies rely on speed, co-location, and direct market access to capture tiny price inefficiencies. In forex, HFT is primarily used by institutional firms rather than retail traders. While it adds liquidity to the market, it can also create unfair advantages and flash crashes. Regulators closely monitor HFT due to potential risks. For most retail traders, HFT is inaccessible, but understanding its impact helps explain sudden volatility and order book dynamics.