High-frequency trading


According to the US Bureau of Statistics, the development of information technology and automated systems has grown in more than 5 times during the past 10 years. Moreover, it still keeps rapidly increasing each year. The new online payment services, platforms for selling goods and services, as well as fund-raising have also developed throughout this time. The whole world has become digital and now it is possible to interact with the Internet in one click. The financial markets are also keeping pace with these trends.

Both private traders and institutional investors (banks, hedge funds) started using high technology products. The main task of the trader is to repeatedly follow a profitable algorithm using the most popular programming languages for the FIX API protocol – C #, python and java. So why not automate it?

High-frequency trading of HFT is such a trading, which allows completing deals of buying or selling forex financial instruments extremely fast. It is a type of trading, which is done by a robot, based on a specific algorithm. FIX API trader can directly trade at the interbank level avoiding the unnecessary delays from broker servers, which allows getting an advantage because there is no delay. Each trader uses a particular trading system, which consists of the certain parameters and principles. This system can be automated.

Because the entire HFT trading is done by robots, they can analyze the data very fast and make a decision whether to open a long or a short position. It creates an obvious advantage, based on the fact that the position is fixated on the FIX API protocol, which is used by most of the financial platforms worldwide. CQG fix api is, particularly, among the leaders.

What is the main principle of High-frequency trading

The increased market volatility is observed at the time of the opening of the exchange, the publication of financial statements of companies or changes in the monetary policy of the Central Bank. The maximum quantity of the high-frequency trading happens exactly at this time.

HFT robots are able to fix the micro results due to spread expansion, arbitrage correlation or the difference in volatility of quotations (usually of the currency pairs). Thus, a huge number of transactions allows reaching a positive rate of return. Of course, this requires a fix api broker, which gives an access to an open liquidity market.

What kind of HFT is the most popular and available for a simple trader?

The HFT algorithm differs within each investment company and is kept in secret. Wikipedia highlights four popular types of strategies, however, the arbitrage is more real and feasible for an ordinary trader. It is as a global principle of the HTF strategy.

An arbitrage is a trading strategy that takes into account the difference in quotations for the same asset due to a “temporary lag.” This type of trading can also be divided into 2 subtypes: FIX API Latency Arbitrage and FIX API 2-legs Arbitrage. The difference between these types is that robot, which follows FIX API Latency Arbitrage strategy finds the price difference for the same asset between the two brokers and opens the transactions with the “slower broker” (Latency Arbitrage). This strategy is often used with the help of lacquering open positions or the FIX API Lock Arbitrage principle. The second robot that works on the FIX API 2-legs Arbitrage strategy makes a purchase of the same asset from one broker and sells it from another one (2-legs Arbitrage). Since HFT completes an operation in a few microseconds, the robot makes several trading operations and record profits when the price of a share on one platform differs from the other with a minimum delay. In addition, the HFT robot can simultaneously analyze several stock exchanges and find the difference in price for the same asset. After that, it makes transactions considering the price delay on one exchange. In addition to the stock exchanges, the price can also differ for the instrument itself and the derivative asset. For example, the cost of shares is 100$, and the price of the derivative instrument is 100.01$. The price lasts for about a second and the robot would open a deal for the sale of a derivative asset during this time. This one cent would be profit for a trader. However, this is only 1 share. Can you imagine if there were 100 or 1000 of such shares per day? It would definitely turn into a significant profit for a company or a trader who has a trading robot.

Here is an example of the arbitrage deal, done by a trading robot:

HFT allows traders to get rid of a constant analysis of market fluctuations and concentrate on the optimizing and automating their trading system. Since the forex market is relatively volatile, you need a fix api forex broker in order to use HTF. This will increase the profitability due to the response speed of the robot, which is definitely beyond the capability of the ordinary person. Moreover, it is possible to build several trading algorithms based on HFT and thereby reduce risks as well as diversify an investment capital.

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