Basics of High Frequency Trading

Nanex’s High Frequency Trading Model (Sped Up)

Nanex released a video showing the results of half a second of worldwide high frequency trading with Johnson and Johnson stock. I simply sped up the footage to get a better feel of what it looked like. Blow Your Mind.

High frequency trading in action

CNN’s Maggie Lake gets a rare look inside the super-fast trading industry.

High Frequency Trading Explained (HFT)

Dave Fry, founder and publisher of ETF Digest, and Steve Hammer, founder of HFT Alert, discuss high frequency trading operations, fundamentals, the difference between quant trading and high frequency trading, fluttering, latency and the role high frequency trading had in the May stock market flash crash in 2010.

TEDxNewWallStreet – Sean Gourley – High frequency trading and the new algorithmic ecosystem

Dr. Sean Gourley is the founder and CTO of Quid. He is a Physicist by training and has studied the mathematical patterns of war and terrorism. He is building tools to augment human intelligence.

Watch high-speed trading in action

Citadel Group, a high-frequency trading firm located in Chicago, trades more stocks each day than the floor of the NYSE.

Wild High Frequency Trading Algo Destroys eMini Futures

One of the scariest high frequency trading algos ran in the electronic S&P 500 futures (eMini) contract on January 14, 2008 starting at 2:01:11Eastern. During its 7 second reign, there were over 7,000 trades (52,000 contracts), and the price eventually oscillated within milliseconds, the equivalent of about 400 points in the Dow Jones Industrial Average!

HFT trading ideally must have the lowest possible info latency (time delays) and the maximum potential automation level. So participants prefer to trade in markets with high levels of integration and automation capacities in their trading platforms. These include NYSE NASDAQ, Direct Edge and BATS.
HFT is controlled by proprietary trading firms and spans across multiple securities, including equities, derivatives, index funds and ETFs, currencies and fixed income instruments.For HFT, participants want the following infrastructure in place:
– High speed computers, which need costly and regular hardware upgrades;
– Co-location.
– Real time data feeds, which must avert even the delay which could affect profits; and of a microsecond
– Computer algorithms, which are the heart of HFT and AT.

Benefits of HFT
– HFT is beneficial to traders, but does it help the total marketplace? Some market that is overall gains that HFT assistants cite contain:
– Bid-ask spreads have reduced due to HFT trading, making markets more efficient. Empiric evidence contains that after Canadian authorities in April 2012 imposed fees that deterred HFT, studies indicated that “the bid-ask spread rose by 9%,” possibly due to diminishing HFT trades. And thus facilitates the effects of market fragmentation.

– HFT assists in the price discovery and price formation process, as it is centered on a high number of orders (see related: How The Retail Investor Profits From High Frequency Trading.)