What is high-frequency trading?
One of the most intriguing things to happen in financial markets is high frequency trading. When various financial parameters like high speeds, high turnover rates, and high order-to-trade ratios works in leverage to yield high quality financial data and advancement on electronic tools used in trading is considered as high frequency trading.
It also includes various types of algorithms which make this strategy of trading more effective. In fact, traders wonder it to be a very dynamic term as it includes lots of cancellation of orders and very short term investment horizons.
How Difficult Is it to Understand?
For one, HFT is not properly interpreted by many of the global market research analysts as well. There are different types of hypothesis and postulates about HFT made by several economists and market researchers, but none of them are confirmatory. These all are only assumptions made on the basis of logical facts and theories. It is considered as preliminary level of trading finance. It is also considered as one of the most sophisticated tools used by trade securities these days.
What are its characteristics?
– Many factors like market making, ticker tape trading, event arbitrage, and statistical arbitrage are closely linked with HFT.
– In stock markets, the most significant part is speed and time of trading. High frequency trading is a technique adopted by traders and jobbers to earn profit from market movement.
– In HFT, high end algorithmic techniques are used to trade in most fast and efficient manner. HFT benefits trader to trade with high speed, high volume and error free execution of trade orders. Movement of market cannot be easily predicted by any person.
– Fast and easy tool is a must for flexibility in trading and for managing your portfolio. HFT is done with the help of software which are made for fast order execution and trading, and such software is designed with the help of algorithm and logic.
High Frequency Trading remains a subject of research by many market interpretators.