High Frequency Trading

[Lorence.xD]

I am not that active on this discussion but sometimes I do lurk. And I think that this post is going to be relevant to the future of trading in general. I was watching a Youtube video about High Frequency Trading and I think that it will be the future of trading because the program can do trading faster than any human being. There is more in depth in the video but I will try my best to summarize HFT, consider that the stock price is around 10 USD and you ordered at that price but the prices dropped to 9 USD and HFT swoops in and buys at that price and then when your order arrives at 10 USD they are going to sell it to you with the profit of 1 USD. I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

Link to the documentary: The Wild World of High Frequency Stock Trading (Documentary)

[LeGaulois]

Will it be used on the cryptocurrency market?

Surely, but the resources needed are not given to everyone. Mainly banks, hedge funds, etc are using it. In the US, they even use what we use to call the "dark fiber" to get a super-high-speed internet connection. Oh, I should mention, the infrastructures for this fiber are paid with citizens' taxes. It's like if, during a war, you pay the tanks for your enemies.

It also needs very developed algorithms and I'm not exaggerating telling you some worth more than a million-dollar
When these entities will enter the market, it is more than likely that they will use the same methods in their race for profits.

Will it face any problem?

I don't see why. If this is not a problem in traditional finance there is no reason it should be any different in the crypto market.
Except for the problem that we could ask ourselves some ethical questions. Namely that as in finance it disadvantages people who do not have the resources I was talking about previously. We will not be on an equal level.

But since people don't seem to care, I don't see why they would start when HTF will be used with the crypto market.
Perhaps it's already in use without we notice it.

[Lorence.xD]

Will it be used on the cryptocurrency market?

Surely, but the resources needed are not given to everyone. Mainly banks, hedge funds, etc are using it. In the US, they even use what we use to call the "dark fiber" to get a super-high-speed internet connection. Oh, I should mention, the infrastructures for this fiber are paid with citizens' taxes. It's like if, during a war, you pay the tanks for your enemies.

It also needs very developed algorithms and I'm not exaggerating telling you some worth more than a million-dollar
When these entities will enter the market, it is more than likely that they will use the same methods in their race for profits.

Will it face any problem?

I don't see why. If this is not a problem in traditional finance there is no reason it should be any different in the crypto market.
Except for the problem that we could ask ourselves some ethical questions. Namely that as in finance it disadvantages people who do not have the resources I was talking about previously. We will not be on an equal level.

But since people don't seem to care, I don't see why they would start when HTF will be used with the crypto market.
Perhaps it's already in use without we notice it.

Some trading firms are even underground so they are closer to the fiber optics running underground but right now I think that in cryptocurrency market, it can be used because trading is slowly switching to microwaves satellite which is a little faster than fiber optics. The one problem mentioned in the video was that a bot to counter the algorithm of HFT can be used to make an artificial crash which made the HFTs after that attack more resilient but not attack proof. If a cryptofirm was to introduce this, I think that we should go and invest in it.

[TheUltraElite]

HFT is already there in the stock market. Maybe we will see it in crypto markets in future.

If the banks and hedge funds are going to get interest in crypto then surely it will happen with time because the competition that comes in between big firms forces them to find new methods to defeat each other.

But first of all, there needs to be a government acceptance of crypto trading which is lacking in many countries.

There was a movie "The Hummingbird Project" that was made on the fiat aspect of HFT - give it a watch too for those who are not aware of it but are reading this thread posts.

[virasog]

I am not that active on this discussion but sometimes I do lurk. And I think that this post is going to be relevant to the future of trading in general. I was watching a Youtube video about High Frequency Trading and I think that it will be the future of trading because the program can do trading faster than any human being. There is more in depth in the video but I will try my best to summarize HFT, consider that the stock price is around 10 USD and you ordered at that price but the prices dropped to 9 USD and HFT swoops in and buys at that price and then when your order arrives at 10 USD they are going to sell it to you with the profit of 1 USD. I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

Link to the documentary: The Wild World of High Frequency Stock Trading (Documentary)

I am not sure about this term "High Frequency Trading" but in crypto we call it day trading where people buy and sell on the same day and get some profits. Some people do trading with a program more specifically  a bot who will keep track of the market and will trade automatically. A bot woks good in a steady market like stock but sometimes it is not useful in a volatile market such as crypto.

[Mauser]

I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

I followed HFT a lot when it came out back in the days. Remeber LTCM back in the day, they were already trying to go in HFT and make a small profit of each trade. If you can make 1 cent profit of 1 million trades than you are going to be fine. In todays world there are so many computers constantly trading. So getting HFT traders into the crypto world should not be a problem and would likely make a decent profit. But there is also quite a lot of risk involved in these black box systems. You need to be 100% sure there is no error in your system. If the trades go wrong you could lose all your money. And even worth people could start exploiting your trading system like in 2010 with the Flash Crash.

[Lorence.xD]

I am not sure about this term "High Frequency Trading" but in crypto we call it day trading where people buy and sell on the same day and get some profits. Some people do trading with a program more specifically  a bot who will keep track of the market and will trade automatically. A bot woks good in a steady market like stock but sometimes it is not useful in a volatile market such as crypto.

HFT doesn't involve human intervention after the algorithm was created, it is in a way an AI that does hundreds of thousands of trading which beats anything humanly possible trading. This is a better alternative to day trading because it buys the lowest price. Trading bots will work if the code behind it is really good, there are some equations that can be used for it so it can still trade efficiently in a volatile market. You should watch the video, I highly recommend it  .

[slaman29]

I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

I followed HFT a lot when it came out back in the days. Remeber LTCM back in the day, they were already trying to go in HFT and make a small profit of each trade. If you can make 1 cent profit of 1 million trades than you are going to be fine. In todays world there are so many computers constantly trading. So getting HFT traders into the crypto world should not be a problem and would likely make a decent profit. But there is also quite a lot of risk involved in these black box systems. You need to be 100% sure there is no error in your system. If the trades go wrong you could lose all your money. And even worth people could start exploiting your trading system like in 2010 with the Flash Crash.

I do recall the days of forex trading when every platform was giving out like free $5 or even some free $10 to trade to everyone even without KYC. Then you see them just signing up 1000s of people on HFT with that free money. You get a pip from every single trade HFT on both ways before it was illegal. People made insane money apparently.

[joniboini]

It's already on crypto. Some people called it algorithmic trading, somebody else names it bot trading. It is basically the same thing. Even Uniswap/Sushiswap or other AMM is plagued by bot right now, arbitraging from various pools to make profits daily.

Some projects suffer from this though, since it creates artificial sell pressure and damages the price in a negative way for holders.

[Kirsting]

I am not that active on this discussion but sometimes I do lurk. And I think that this post is going to be relevant to the future of trading in general. I was watching a Youtube video about High Frequency Trading and I think that it will be the future of trading because the program can do trading faster than any human being. There is more in depth in the video but I will try my best to summarize HFT, consider that the stock price is around 10 USD and you ordered at that price but the prices dropped to 9 USD and HFT swoops in and buys at that price and then when your order arrives at 10 USD they are going to sell it to you with the profit of 1 USD. I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

Link to the documentary: The Wild World of High Frequency Stock Trading (Documentary)

HFT has been present since the beginning of trading on exchanges.

Will it be used on the cryptocurrency market?

Surely, but the resources needed are not given to everyone. Mainly banks, hedge funds, etc are using it. In the US, they even use what we use to call the "dark fiber" to get a super-high-speed internet connection. Oh, I should mention, the infrastructures for this fiber are paid with citizens' taxes. It's like if, during a war, you pay the tanks for your enemies.

It also needs very developed algorithms and I'm not exaggerating telling you some worth more than a million-dollar
When these entities will enter the market, it is more than likely that they will use the same methods in their race for profits.

Will it face any problem?

I don't see why. If this is not a problem in traditional finance there is no reason it should be any different in the crypto market.
Except for the problem that we could ask ourselves some ethical questions. Namely that as in finance it disadvantages people who do not have the resources I was talking about previously. We will not be on an equal level.

But since people don't seem to care, I don't see why they would start when HTF will be used with the crypto market.
Perhaps it's already in use without we notice it.

HFT is a fairly broad concept, from slow intraday trading (1-10 trades in the day) with closing positions at night(if the market closes) and the so-called UHFT with hundreds of orders per second and dozens of trades for hundreds\thousands of financial assets.

The requirements for infrastructure and specialists are also very different, from a couple of thousand dollars spent on programming your scalping strategy and connectors to the API of exchanges, to hundreds of millions if you want to compete with Jim Simons funds.

[bassbity]

if the comparison between rising and falling only made $ 1 maybe it would look monotonous if it had to enter the realm of cryptocurrency. don't we know how the crypto trading volume is very fast-moving plus the competition is so fierce. I'm not sure HFT will be comfortable in the crypto market.
You probably already know what crypto traders love, namely, high price ranges.

[DarkDays]

I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

I followed HFT a lot when it came out back in the days. Remeber LTCM back in the day, they were already trying to go in HFT and make a small profit of each trade. If you can make 1 cent profit of 1 million trades than you are going to be fine. In todays world there are so many computers constantly trading. So getting HFT traders into the crypto world should not be a problem and would likely make a decent profit. But there is also quite a lot of risk involved in these black box systems. You need to be 100% sure there is no error in your system. If the trades go wrong you could lose all your money. And even worth people could start exploiting your trading system like in 2010 with the Flash Crash.

I agree with you in this. High Frequency Trading is becoming more and more common in markets and if one can get around to involving a system that works best in their favour then all the better. But before you get to that stage you really need to make sure that this new 'black box' behaves in the way intended or else you might end up losing big.
This is particularly something to be mindful of when buying such systems off the market as these might be bugged or something. This could be a limiting factor to having more and more people adopting this - i know this as I think this myself.

[dothebeats]

So basically the ones with the most optimized toys get all the goodies in the field? It'll be easy to make profits in the cryptocurrency market if that's the case. I'm pretty sure crypto trading bots already have those elements in their algorithms, although they cannot execute fast enough unlike HFT bots. Tons of optimization would be required to achieve the numbers of what the stock market HFT offers, and it's no easy feat IMO.

[Jiuks]

So basically the ones with the most optimized toys get all the goodies in the field? It'll be easy to make profits in the cryptocurrency market if that's the case. I'm pretty sure crypto trading bots already have those elements in their algorithms, although they cannot execute fast enough unlike HFT bots. Tons of optimization would be required to achieve the numbers of what the stock market HFT offers, and it's no easy feat IMO.

Biggest challenge relies on exchanges themselves. They have to propose such technology to let crypto traders act as fast as usual HFT traders do.

[Lorence.xD]

So basically the ones with the most optimized toys get all the goodies in the field? It'll be easy to make profits in the cryptocurrency market if that's the case. I'm pretty sure crypto trading bots already have those elements in their algorithms, although they cannot execute fast enough unlike HFT bots. Tons of optimization would be required to achieve the numbers of what the stock market HFT offers, and it's no easy feat IMO.

The load on the crypto market is going to be big because the fastest trading bot that I can remember was around 270,000 trades per blink of an eye, maybe if exchanges have their own infrastructures to be able to do the workload without a hitch. Isn't that the rule a long time ago, those in power get the good toys to play with?

[Kittygalore]

I have heard of this kind of thing back then but it was about the guy who put an algorithm that screws with the algorithm of the HFT, he was from the UK if I recall and what he did made the people from this HFT firms panicked because they are slowly losing their money, I forgot how the guy did it but the speed at which the stock prices gone down is definitely noticeable, I don't know the exact duration of the attack but it never reached an hour and I think billions of dollars were lost in that span of time.

[Lorence.xD]

I have heard of this kind of thing back then but it was about the guy who put an algorithm that screws with the algorithm of the HFT, he was from the UK if I recall and what he did made the people from this HFT firms panicked because they are slowly losing their money, I forgot how the guy did it but the speed at which the stock prices gone down is definitely noticeable, I don't know the exact duration of the attack but it never reached an hour and I think billions of dollars were lost in that span of time.

I think what you are referring to is Navinder Sarao, the HFT was growing strong over the years so he decided to spoof the market that flooded the market with sell order that loops and that loop crashed the market. He was mentioned in the video if you check it out, I don't shill the video, I just find that it helps a lot that we know the context behind HFT and how it can be used in crypto market.

[michellee]

I am not that active on this discussion but sometimes I do lurk. And I think that this post is going to be relevant to the future of trading in general. I was watching a Youtube video about High Frequency Trading and I think that it will be the future of trading because the program can do trading faster than any human being. There is more in depth in the video but I will try my best to summarize HFT, consider that the stock price is around 10 USD and you ordered at that price but the prices dropped to 9 USD and HFT swoops in and buys at that price and then when your order arrives at 10 USD they are going to sell it to you with the profit of 1 USD. I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

Link to the documentary: The Wild World of High Frequency Stock Trading (Documentary)

I only think about that trade type will use the AI technology to trade as I see that it looks like a bot running trading. Maybe that can be feasible on the crypto market, but I am not sure if AI technology can accurately detect market movements because the crypto market moves are hard to predict. But that type of trading will run automatically following the market movements. The problem will always come to a new thing, but I am sure that we can fix that problem and have better technology because the technology itself will grow.

[adzino]

I am not that active on this discussion but sometimes I do lurk. And I think that this post is going to be relevant to the future of trading in general. I was watching a Youtube video about High Frequency Trading and I think that it will be the future of trading because the program can do trading faster than any human being. There is more in depth in the video but I will try my best to summarize HFT, consider that the stock price is around 10 USD and you ordered at that price but the prices dropped to 9 USD and HFT swoops in and buys at that price and then when your order arrives at 10 USD they are going to sell it to you with the profit of 1 USD. I am using stock as an example because the documentary that I watched was mostly focused on that. My question is, will HFT be feasible in the cryptocurrency market? Will it face any problem?

Link to the documentary: The Wild World of High Frequency Stock Trading (Documentary)

High Frequency Trading has been highly criticized by small investors and firms. Only those big hedge funds and companies manages to make all those profits using high frequency trading. The small investors consider this as an unfair advantage and they are at the highest risk.
I don't thing there are high frequency trading in crypto currencies. Others over here who are talking about the "bots" are the ones talking about regular bots that buy low sells high. Based on how volatile the price of crypto is, HFT would cause even more volatility due to flash price crashing. So do we really want HFT in crypto?

[Kirsting]

Biggest challenge relies on exchanges themselves. They have to propose such technology to let crypto traders act as fast as usual HFT traders do.

That's correct. Classic stock exchanges have hundreds of times more power (> 10m orders per second), compared to "web exchanges"(< 100k orders per second) which are sometimes done entirely on PHP and API works only on websockets.