Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
High-frequency trading has a number of disadvantages
Market terminology

High-frequency trading and its advantages for playing on the exchange

31.08.2022
2 min read

What strategies include high-frequency trading

The development of technology has made it possible to automate processes in many areas, including exchange trading. Thanks to innovations, such a trend as high-frequency trading has emerged. One of its features is the high speed of opening and closing transactions, which takes only a few milliseconds.
These functions are assumed by a special program, which can make decisions as quickly as possible. But do not think that speed is the only advantage of high-frequency trading. In this case, the fact that the broker receives information about quotes and other important information faster than others plays a decisive role.
Using this approach, it is possible to catch the dynamics of the market, and its changes long before it becomes known to a wide audience. It should be noted that high-frequency trading is common in companies and funds that are close to stock exchanges. They have direct access to the platforms, which gives them the opportunity to learn about changes faster than other traders and without intermediaries. This mechanism is used for trading activities with underlying assets, which include stocks and futures.
In terms of earning, the use of high-frequency trading has its own peculiarities. The program allows you to open a large number of deals in a second, but the profit from them can be low. If a broker wants to get serious money, he must open a position for a large stake, and it is associated with risks.High-frequency tradingThere are several strategies in this approach:
1. Classic arbitrage. The trader tracks the similarities in the behavior of an asset on different exchanges. The program detects that the price has changed on one of the exchanges, and opens a deal.
2. High-frequency trading as a liquidity option. Companies that employ this strategy are located near exchanges. Having direct access to information, they can provide liquidity to other brokers. In this case, they take a fee in the form of a spread.
3. As a way to get information to get ahead of the competition.
4. Identification of hidden orders from large traders. The program makes orders in small volumes and at the same time changes the time of their closing. The faster the algorithm carries out such operations, the more likely it is that the competitor is a major player who opens orders for large volumes. Accordingly, its actions affect the changes in quotations.
High-frequency trading has a number of disadvantages, first of all, we are talking about high risks with large lots. It should also be taken into account that the algorithm can fail. Then a huge number of orders, which are opened in a few seconds, will turn into serious losses for the company.

Tags: Market terminology
0
Previous Post SpaceX received investments for the development of its projects Next Post FIAT: the history of the Italian car manufacturer

You Might Also Like

Counterparty risk definition
Market terminology
Counterparty risk: when it is important to measure its level
27.06.2022
swing trading
Market terminology
Swing trading: essence of the strategy and its benefits
24.03.2021
property tax
Market terminology
Property tax: an overview of the calculation and its feasibility
23.01.2023
backtesting
Market terminology
Backtesting: efficiency of strategy application for a trader
14.03.2021
The concept of financial management-1
Market terminology
The concept of financial management in terms of the investment horizon
18.05.2022
allonge
Market terminology
Allonge: a French term used in the financial sector
06.12.2022

Recent Posts

  • 1Margarete Steiff teddy bear
    Margarete Steiff was the seamstress who gave the world Teddy Bear
    29.11.2023
  • 2Huawei
    History of the Chinese corporation Huawei and its achievements
    27.11.2023
  • 3order block
    Order block and its use for stock exchange trading
    25.11.2023
  • 4Bahrain and the UK
    Bahrain and the UK intensify cooperation
    23.11.2023
  • 5Genesis MedTech IPO
    Genesis MedTech plans to float its shares on the Hong Kong Stock Exchange
    21.11.2023

Popular Posts

  • Skolkovo analysts: the Russian energy market is suffering losses
  • Analysts: Egypt’s economy to continue falling in 2023
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation

Social media

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Press Secretary
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Press Secretary
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Press Secretary
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Press Secretary
16.05.2020

Latest Posts

Margarete Steiff teddy bear
Margarete Steiff was the seamstress who gave the world Teddy Bear
29.11.2023
Huawei
History of the Chinese corporation Huawei and its achievements
27.11.2023
order block
Order block and its use for stock exchange trading
25.11.2023

Chaslau Koniukh

Expert Chaslau Koniukh

Chaslau Koniukh – an expert in marketing and project management, IT consulting, international investments, investor, financial analyst. A commodity trader, private consultant, entrepreneur, lecturer, author of several articles on the stock market.

Popular Posts

  • Skolkovo analysts: the Russian energy market is suffering losses
  • Analysts: Egypt’s economy to continue falling in 2023
  • Businessman Chuck Feeney: the man who gave the world Duty Free
  • Field of activity of the American Monsanto Company Corporation
  • Howard Schultz: history of the Starbucks coffee chain foundation
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram
  • Biography

Chaslau Koniukh – an expert in marketing and project management, international investments, financial analyst.

Social media

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics