High Frequency Trading is often considered as an entire concept which is different from the algorithmic trading. This is completely untrue. The high frequency trading is a part of algorithmic trading which involves the same set of computerized handling and everything but the only difference is the frequency with which the orders are getting processed. The high frequency trading will be dealing with orders at a faster rate than any other trading strategies. But it doesn’t mean that it is a whole different concept of trading. This strategy is also been written using algorithms only.
How does a HFT work?
High frequency trading (HFT) when compared with the other decision-making algorithmic trading strategies makes use of the advanced technologies in the market so as to enhance the rapid speed in trade that gets repeated several times. A typical HFT will be sending millions of quotes to the exchange. But the exchange will be executing just 1% of the quotes sent or even lesser than that. This High Frequency Trading which has the high-capacity to work at a rapid speed has really created a fear among the marketers and even the regulators are prone on this. But having a quite good knowledge on the High Frequency Trading will help the traders to overcome the fear of speed. Obviously the speed has certain issues with it. There are even chances of the market getting crashed. But handling the strategy with a command will work out good, says some marketers.
Smart routing in HFT is a unique idea which no other strategy follows. It is quite nature that in order to reach a destination, one must have to take the shortest path. The High Frequency Trading does the same. When the orders are getting dispatched, the HFT will first try to find the shortest path to send the orders to the exchange. Whatever and wherever the source of order may be, the shortest path will be found to reach the exchanges and then the order will be sent through that shortest path. The algorithms are written in such way that it should find the best and shortest path to reach the destination. And hence it does.
But on the other hand, the smart routing is not only selecting the shortest path, but also selecting the best venue for sending the orders. This will make sense that the High Frequency Trading will let you have a good profit by sending the orders to a venue that pays more for you. Thus smart routing helps the investor to go for a better trading experience than any other trading strategies. In order to learn more on HFT, it is better to choose a right HFT training institute to learn the technical aspects of HFT. There are so many trading academies available all over the world and are offering best HFT courses at right price. Hence it is better to choose the right place to learn the best.