High Frequency Trading, or HFT for short has been around ever since stock exchanges first introduced computers where they ported all of their information. This allowed for stock trading to take a much faster and global approach, thus bringing us the economics of the modern world.
However, many people believe that HFT is designed for stocks as cryptocurrencies don’t necessarily reach the volume of company shares. This is true to some degree, but the fundamentals are still the same. Regardless of how the volume is lower for cryptocurrencies, we can’t forget about the blockchain technology it’s based on, thus increasing the speed even more.
When it comes to crypto trading, we may not see the way our orders are processed. In more detail, we can’t necessarily see that our orders are delayed. For example, imagine that you’ve placed a buy order for Bitcoin when it reaches $8,800. The order is immediately processed, but that’s what we see through our eyes. In reality, our order could be delayed by milliseconds, which doesn’t necessarily make that much of a difference on the surface. But the moment we include HFT users, it will make quite a lot of difference.
What is High Frequency Trading?
HFT is a term for an algorithm that is designed to catch trades as they are being processed and try to find the most profitable moment of entry. No, it’s not about determining the support and resistance levels for specific cryptocurrencies. It’s about finding out how much a specific buyer is ready to pay for a single coin.
The reason why many crypto traders have not heard about HFT is because of the volatility of the market. The way cryptos increase or decrease by sometimes 10% in a single second makes it a very risky decision to include HFT algorithms.