Hign frequency Trading

In broad terms, high frequency trading (HFT) entails buying and selling stocks at an extremely fast pace, at short intervals, through powerful computers. Through complex algorithms, these advanced computers scan several marketplaces simultaneously, alter strategies in a millisecond and execute orders in a second.

High frequency trading is gaining widespread popularity as it is believed to narrow the spreads between the bid and ask (offer) prices. This, consequently, reduces the trading costs for the market participants. Moreover, advocates of HFT argue that it increases the market liquidity.

Components of High Frequency Trading Strategies

Characterized by short holding times, high frequency trading helps make short returns per trade. HTF’s are executed with the help of computer-driven responses to changing market situations. In general, high frequency trading consists of multiple trades in a day, with very limited positions carried overnight.

Overnight positions are, typically, not considered for HTF as it is comparatively more risky due to the volatile nature of the foreign exchange market. Besides, overnight positions usually accompany carry rates, which decrease the profitability of high frequency operations.

Some other key components or requirements of effective high frequency trading are:

  • Low latency: High-frequency trading strategies can only succeed in an ultra-low latent platform, which is capable of collecting, routing and executing information in milliseconds.
  • Multiple asset classes: Most high frequency trading strategies entail transactions in multiple asset classes, across multiple exchanges, it is crucial to have appropriate infrastructure to facilitate long-haul connectivity among different data centers.

High Frequency Trading: Important Considerations

A competitive investment strategy to begin with, high frequency trading may dilute over time. This is because high frequency trading is dependent on highly precise market interactions and asset correlations. Therefore, for optimal executions, trading algorithms need to be adjusted regularly to reflect the subtle changes in a dynamic market.

To optimize your high frequency trading strategies, seek assistance from a professional investment firm. White Swan Global Markets works extensively with high frequency and algorithmic traders to ensure that their liquidity and executions matches their requirements to the tee. Other reasons to trade with White Swan Global Markets are:

  • Access to prices from a multi-bank platform
  • Varying spreads, ranging from 0.1 to 0.5 pips on available pairs
  • Low latency and tailored liquidity bandwidth

Finally, White Swan Global Markets offers specialized (discounted) pricing on high frequency trading, on fulfilling the minimum volume requirements.

 

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