What is High-Frequency Trading (HFT)?
Let's find out High-Frequency Trading (HFT) meaning, definition in crypto, what is High-Frequency Trading (HFT), and all other detailed facts.
It’s a sort of algorithmic trading. The trading method holds financial information and high-tech electronic trading devices to research markets as well as process a large number of orders quickly.
It’s anticipated that HFT algorithms add up to a significant portion of the worldwide market trading volume. Owing to the difficulty of these algorithms, this trading approach is often only available to huge financial firms.
Also, in order to gain small amounts that eventually add up to a decent amount of profit, high-frequency traders try to move in and out of trades as quickly as possible. Usually, those who complete their orders faster have an advantage over those that are slower. So, execution speed is important.
Because of the favorable market impact, several exchanges incentivize HFT by paying refunds or reducing costs to HFT suppliers. HFT can enhance market settings by supplying a consistent flow of liquidity and even eliminating bid-ask spreads.
However, this type of trading can also increase market volatility. This is because there is no need for any human engagement. The algorithms are designed to have an instant decision-making feature.
It’s difficult for traders to benefit from the liquidity because it can appear and disappear in a matter of seconds. This is why high-frequency trading is considered to be a controversial trading technique.