Jump trading with HTF
I'll start with an example, I'm sure it will be easier for you to grasp it.
In a market system, we have institutional investors (large firms that buy and sell stock), that bought 1 million shares at the price of $40.7. The price of the stock is stable at $40.7 because there is no transaction going on and institutional investors are holding their stock. As time goes by, more I.investors are interested in the stock because they have heard that some people actually made money from it. By attracting more I. investors, the stock price rises to $60.6, yet it is stable again, as the I. investors who gained from the $40.7 are selling, while new I. investors are buying the stock, expecting that it will rise further.
Where HTF (High-Frequency Trading Firm) comes in is when an institutional investment firm sells their stock, leading to a drop in price, they quickly jump in and buy it back at a low price to sell them higher a few minutes later.
Jump trading refers to sophisticated trading strategies, that high-frequency trading (HTF) firms use for trading
There are complex technologies that are very fast in terms of connecting with trading floors of exchanges that HTF uses to apply hedge fund strategies, including index arbitrage, merger arbitrage, long/short equity, and others.
At the same time, the fact that retail investors underperform the markets, lagging major benchmarks, allows HTF firms to provide aigher growth, while practically eliminating active management. Usually, HTF firms keep a low profile and are reluctant to reveal their trading secrets.