HIGH FREQUENCY TRADING

LATENCY ARBITRAGE: EXPLAINED IN SIMPLE WORDS

Technology improves our world• Over the last years the world is gaining speed in almost every aspect

of its life. Humans are automating everything they can to get things done faster, achieve more and work less. Or it is probably just seems so. In reality, we work harder because we need to constantly learn and adjust to a changing techno environment.

Forex is among the most tech industries• The forex market is among the leading industries to employ tech and

thrive on this. Let’s take high frequency trading. A pure and straight forward example of achieving new horizons with the technology employed

What’s HFT?• It is a high frequency trading method that allows to open/close trades

at a super high speed, in other words it buys and sells forex instruments very fast. These operations are only possible because of forex robots.

How does it work?• The trading is carried out by forex robots that are able to analyze the

data super-fast and make a decision whether to open a short or a long position therefore creating advantage with fixing the position at a FIX API protocol that is widely used by forex market.

How does it work?• The market volatility is always increased at certain points – stock

exchange opening, expected news releases, monetary policies change of Central Bank, etc. These are key moments for high frequency trading. Due to a bigger spread, volatility of quotes and arbitrage situations the forex robots fix micro results on a the number of trades creating positive outcome

Best HFT for a trader is Arbitrage• Arbitrage trading – a strategy based on a difference in quotes that

appears due to a certain time or speed lapse for the asset. This type of trading can be either FIX API Latency Arbitrage or FIX API 2-LEG ARBITRAGE. What’s the difference between these two? In the first case, a robot finds a difference for the same asset between two different brokers and opens a position with a slower broker, thus – Latency Arbitrage. In the second case a forex robot buys an asset from broker 1 and sells it with broker 2. Because the speed of a trade is measured in milliseconds, a robot can open and close many trades within a very short period and can fix positive results.