Latency arb is taking advantage of people with slower connections by being able to place&#x2F;cancel orders faster than them. As most exchanges are price, time priority, unless someone beats your price, first in line gets filled first.<p>&gt; To &quot;flip the spread&quot; you need to predict where the market will go after your order gets elected.<p>Lets talk abstractly for a moment, that sentence is exactly wrong.  The whole point of flipping the spread is that you can immediately sell what you just bought and make the spread risk free.  That&#x27;s what market making is, providing liquidity for the spread as profit.  Now, pragmatically, of course the market doesn&#x27;t sit still for long and the price may change between your buy and sell so of course it&#x27;s good to predict the market direction to reduce the risk of being on the wrong side of a move.  But HFT is trading at the microsecond scale, prices aren&#x27;t moving much at that scale in that short a period of time and you only need to know where the market is going for say the next second to be in an out of a slew of trades.<p>&gt; The market is pretty efficient.<p>Agreed.<p>&gt; The average limit order loses the spread and rebates after execution.<p>I don&#x27;t believe that.  That would mean that slippage exceeds the spread and more on most orders and unless you&#x27;re trading a very illiquid market there&#x27;s no way that can be true unless you&#x27;re trading very large, large enough to move the market alone.<p>&gt; You are right that the actual execution algorithms aren&#x27;t doing super complex analysis in real-time.<p>That&#x27;s my main point.<p>&gt; Usually that is done offline through simulation to generate rule sets, decision trees or factor weightings. That work is definitely quantitative.<p>I agree with that as well, but that&#x27;s not HFT trading, that&#x27;s market analysis and mostly I believe, though I admit I could be totally wrong here, that analysis is mostly used for slower algorithmic trading, not HFT.  In HFT, it&#x27;s better to be faster than smarter, especially with the sub-penny rule imposed by Dodd-Frank.