What is High-Frequency Forex Trading

Words High-frequency trading with the financial data on the background.

The world of currency trading is full of confusing terms and concepts. But if you go through them one by one, very soon the pieces of the puzzle will fall together and you’ll be able to call yourself a successful trader. Today we discuss what is high-frequency (HFT) in Forex and how can you benefit from it.

High-frequency trading definition

To define high-frequency trading we need to take a look back into history. Some thirty years ago Forex trading was a rather complex process. For one, you had to either physically be at the exchange place or have a connection with someone there over the phone. Needless to say, the frequency of trading wasn’t that high.

Then, with the introduction of digital trading, the number of traders rapidly grew. Today thousands of positions open and close every minute. Some of those positions only exist for a few moments to a couple of hours, and soon after they get executed other ones appear. This way, the high-frequency trading definition is trading that happens at an advanced speed usually within narrow timeframes enabled by electronic devices.

What is HFT trading

Today almost every trader is involved in HFT meaning that they can provide several examples of benefiting from it. As long as you trade using your smartphone, tablet, or computer, you can consider yourself an HFT trader. And your broker who gave you access to all the digital tools and info sources is by definition an HFT broker.

High-frequency trading explained

However, digital trading isn’t the only way of understanding high-frequency trading. Some market experts would say that HFT is not about the tools you choose for your trading, but rather about the overall style you prefer.

Most high-frequency trading techniques include focusing on small rewards, avoiding overnight swaps, and processing a high number of trades within a limited time. The most popular HTF approach is scalping, where traders aim to shave off insignificant fluctuations from the chart, adding them up into one big profit.

Understanding high-frequency trading

Some of the HFT benefits include reduced analysis, faster profits, and dynamic, action-filled trading process. However, it is important to understand that rush decision-making always goes hand in hand with an escalated amount of risks.

That’s why before diving into any of the HFT strategies, you have to consider all ups and downs, as well as gather the most suitable instruments to help you in the process.

High-frequency trading indicators

Since we have got high-frequency trading explained as a fast-paced approach that aims at benefiting from market noise, it is logical that high-frequency trading indicators are the ones that help capture those insignificant fluctuations.

Many scalping experts will confirm that the oldest tricks in the book such as MA ribbon or the combination of 5-3-4 Stochastic with BB do the job just fine. And to take the signal location even further, it can always be helpful to zoom in and out various timeframes, to make sure the bigger picture is accounted for.

High-frequency trading techniques

One of the most common high-frequency trading techniques is to set a profit limit at a specific number of pips and follow it religiously. This means that if your goal for the day is 10 pips you stop trading after you have reached it.

The same goes for setting a loss limitation, to avoid losing more than you can afford. In general, having a strict set of rules and scenarios for any type of trading scenario can be highly beneficial, especially in something as concentration-consuming as HFT.

The benefits of high-frequency trading

The advantages of high-frequency trading vary from one trader to another. Some engage in it for the highly dynamic experience, others due to the lack of time. But here are some of the benefits of high-frequency trading that apply to everyone:

  • Simple to follow through
  • Requires less planning than long-term approaches
  • Plenty of tools and strategies to choose from
  • Fast results
  • Suitable for most traders

How to learn high-frequency trading

You might ask: how to learn high-frequency trading? And the best answer is: through trading. HFT sounds simple enough on paper, but it does require a certain level of skill to be mastered. Only by trying it out and evaluating all the pros and cons, you can effectively learn to high-frequency trading.

How much do high-frequency traders make

Finally, let’s find out how much do high-frequency traders make. And the best news is as much as they want. Any trading strategy and style is nothing more than a suggestion on how to make trading decisions. But the level of each trader’s income depends only on the amount of confidence and dedication the trader has.


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