Understanding High Frequency Trades HFT

WHAT IS HFT

HTF is an acronym for High Frequency Trade. As the name suggest it is a modern trading system that makes use of high definition computers software (Algorithms) to make quick orders and transactions in markets such as the stock exchange and the Foreign exchange market. This system of trade enables millions of multiple trades at the same time

DEVELOPMENT OF HFT

Businessmen had always searched for a way to make quick transaction. As trade become more sophisticated cutting across bothers and time zones the need to make quick negotiations and fast deals arose. This inspired various quick bank and trade negotiations that have grown to making transactions and payments in split seconds.

REASON FOR HFT

Rapid technological advancement is the major reason why firms and business men use the quickest trading system. The world is moving at a very fast pace and no one wants to be left behind hence the need for HFT. Also there is great risk in major markets like the Forex market that is volatile and unpredictable. So, it seems that the best way to make profits is to break into the market at quick and regular intervals. This enables brokers to hold investment for a long time thus conquering the fear of running at loss. The stringent and changing regulations in forex and crypto currency market is also one of the reason for HFT

HFT IN THE FOREX MARKET

The stock market has been using the high frequency trade; it only made an appearance in the forex market some few years ago. And today Forex accounts for more than 50% of the volume of HFT market dealings. The HFT strategy has become one of the best strategies used by forex traders because it entails superfast and short operations.

This makes HFTs the best tool for the vast and volatile FX market. HFT is able to analyze, process and identify thousands of trade probability in micro seconds. This means that before the ordinary or retail trader gets the information, the HFT user must have be done that with the benefit of that trade. Using hft keeps traders ahead of their business mates.

DRAWBACKS

Only huge financial firms and big forex brokers can afford the super fast and standard computers that runs the HFT process.  This makes the fx market an unfair platform to trade on since only a privileged few enjoy the swift flow of vital knowledge about market fluctuations.

However, there are still some issues with the HTF process. They range from shortage of skilled people to run the algorithm computer process correctly to the fear of the computer programs going wrong or having faults that might lead to huge financial loss. These are the fear of working with computers… they are fast and have unique operation but can be deadly because is difficult to reverse transactions in case of errors.

REMEDY

With the incessant risk factor of HFT in Forex, ideas like the switch break app and circuit breakers are put in place to forestall computer crashes and data misinterpretation that can lead to major loss in the world’s major markets like the stock market and FX market.

The world business is growing fast and the use of HIGH FREQUENCY TRADE IS ONE OF THE MAJOR VALUABLE inventions that has aided the ease and versatility of trade. The innovation however has been predicted to be (if things go wrong) the major market and investment disaster that can ever happen.  The major FOREX players need to be careful and put mechanisms in place to control the HFT risk and pace.

 

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