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High Frequency Trading, a trading method full of controversy


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All traders who are experienced in forex trading are certainly familiar with the term High Frequency Trading or abbreviated as HFT. Yes, this trading method uses sophisticated supercomputer equipment and is capable of carrying out high-speed trading in a few microseconds.

By opening many orders in a short period, traders engage in high-speed trading. HFT utilizes high-frequency financial data and modern, highly sophisticated electronic trading tools. With it, it can analyze the market and execute orders automatically. In essence, HFT trading utilizes the smallest price to carry out transactions.

Advanced HFT trading tools are designed for various strategies, According to the FXOpen blog, there are 4 HFT trading tools

  • Market Making, this software involves continuously offering buy and sell prices for currency pairs and stocks to capture big-ask spreads thereby contributing to market liquidity.

  • Order Flow Analysis: This software is designed to track large institutional orders and execute these orders first, quickly buying or selling to take advantage of subsequent price movements.

  • Tick Scalping: This strategy is designed to capture small movements in price differences within milliseconds.

  • Machine Learning and AI, software that involves machine learning and AI has now begun to be developed by the latest programmers. These algorithms continue to learn from market data to perfect strategies and adapt to changing market conditions.

Apart from making a positive contribution to the forex market, HFT trading has also received criticism and is detrimental to retail traders because it can increase volatility.

You can learn more about high-frequency trading via the FXOpen blog under the title High-Frequency Trading (HFT) in Forex and Stocks
 

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