Explain the edge that low-latency traders hold over slower market participants

Low-latency traders act on information and order flow faster than others, often in microseconds. Speed lets them update quotes before prices move against them, reducing adverse selection so they can quote tighter spreads; trade quickly on news before prices adjust; exploit tiny price differences across fragmented venues; and cancel or modify orders instantly when conditions change. They achieve this through co-location and direct data feeds. For institutional investors, the consequence is that large visible orders may be detected and traded ahead of, so managers use algorithms that hide intentions, dark pools and randomised order sizes. Low-latency trading also typically adds liquidity in normal markets. A trap is assuming such traders always add liquidity; in stress they can withdraw quickly.