High-frequency trading (HFT) is a primary form of algorithmic trading in finance. Specifically, it is the use of sophisticated technological tools and computer algorithms to rapidly trade securities. Here is the collection of 7 videos which explains what high frequency trading in simple terms. Watch How institutional traders take advantage over the other market participants.
In India I meet so many Top broker HFT Desk their return in HFT is not so consistent. When they invested in High end technology & develop their own In house Low latency Order management Engine they get more than 50% return per annum. If they constantly not upgrading their technology then their return tempered& goes down with in range of 25 – 30%.
Time decay can be a wonderful thing for the option seller. In fact, it is the driving force behind the so-called ‘income-generating’ strategies. The trader holds a position, waits, and then exits with a nice profit. When the position is market-neutral, and when the market behaves, all gains can be attributed to the magic of time decay.
In 2013, an estimated 70% of trades in US equities are from HFT services and in India HFT volumes occupies 34% of the total trades as per latest NSE Estimates. Most of the high frequency traders in India are either market makers or arbitragers trying to make money at micro second to milli second level.
For me, having 15 Years experienced HFT & Quant Based Solutions & Fund management person, which I also enjoyed immensely, the market offered an opportunity to test myself and to prove I could generate economic profits for clients. A harsh meritocracy also has its advantages if you enjoy the daily challenge.
HFT, on its own, is exactly what the name suggests- extremely fast, high frequency trades. Instead of placing a trade per second, High Frequency Trading firms have reached a point where they can place multiple trades within nanoseconds. Not milliseconds (1/1000th of a second) or microseconds (1 millionth of a second), but nanoseconds- that is, 1 billionth of a second.
Over the past few Year’s, there has been a quick shift towards algo / Quant HFT (High Frequency Trading) based trading, Where as Asset managers make 24% return in market & HFT traders make 300% Return. Both among long-term investors using execution algorithms to lower trading costs and short- term investors automating market making and statistical arbitrage strategies
Latency arbitrage is the practice of buying or selling an trading instrument slightly ahead of other market participants, by taking advantage of small delays in price dissemination. So Measuring the Latency between Exchanges makes sense when comes to Inter Commodities Hedging or Inter-Country Latency arbitrage.