High Frequency Trading
High Frequency Trading
High Frequency Trading (HFT) is a powerful investment force in modern financial markets. This trading platform uses complex computerised algorithms to analyse multiple markets, executing orders based on market conditions.
What makes HFT unique is high-frequency turnover of positions, ultra-low latency connections and powerful computers that enable a large number of orders to be transacted in fractions of a second – faster than any human, faster than the average computer. Typically, traders with the fastest execution speeds will be more profitable than traders with slower execution speeds.
The tremendous processing ability and speed of HFT makes HFT players among the most effective and powerful trading specialists in the industry.
Some interesting facts about HFT
HFT accounts for an estimated 70% of all US equity trading volume as of 2014
Assets under management for hedge funds with HFT strategies is around US$201 billion
In Europe, HFT accounts for 50% of equity order volume and in Asia, 15% with potential for rapid growth
3 types of HFT firms
HFT trading using private money and different strategies
Broker-dealer proprietary desks
Firms with separate HFT desks, e.g. large investment banks
Invest using common HFT strategies
Broker-Dealer Proprietary Desks 48%
Hedge Funds 6%
Independent Proprietary Firms 46%
A super-engineered, fortune-seeking electronic brain at your command
How HFT Works
Designed and optimised to make profits in milisecond
The high frequency trading model consists of two major parts, the trading software and computer hardware. The software algorithm must be sophisticated enough to analyse all kinds of market news and data, and subsequently make accurate trading decisions.
HFT firms engage math geniuses and other smart people to ensure the software performs its function as efficiently as possible. We also constantly seek innovative ways to optimise our strategies, detect and take advantage of market opportunities.
Popular HFT strategies
It take advantage of certain predictable events to generate short-term profits.
News based trading
The system processes news feeds from various sources and act on the information before it appears on-screen to the general public.
Machines talented enough to see a thousand opportunities in seconds
How fast can HFT be?
The system moves so fast, its actions are practically invisible. This enables HF traders to move ahead of the market to take advantage of the tiniest window of opportunity. In the exclusive world of high frequency trading, there are no speed limits.
HFT Profits at a Glance
HFT computers can move in and out of trading positions in milliseconds.
It aim to capture sometimes a fraction of a cent on every trade.
It make up for the low margins with high volumes of trades, usually in the millions.
HFT do not consume large amounts of capital, accumulate positions or hold portfolios overnight.
HFT algorithms can scan dozes of public and private market places simultaneously. They can spot trends, change orders and strategies within milliseconds.
It also gain a major speed advantage by placing servers next to the exchange servers.
HFT firms enjoy direct market access through Exchange/Prime Brokerage.