Is HFT Good Or Bad For Your Business?
High Frequency trading has had its share of positive and negative criticism. It all depends on which side you, as a trader are on. With its advantages that it gives to large corporations and banks, hedge funds and institutional investors, it is perceived to be good. But if it is a small firm that one is looking at, then one is certainly at a disadvantage. Before analyzing the good and bad of HFTs, let us first know a few facts about HFT.
Facts about High Frequency Trading
- HFT is a program trading platform, where fast computers are used.
- It uses algorithms and mathematical models to arrive at decisions with a matter of a few seconds.
- They have transformed the way trading happens, quite drastically, all over the world.
- Algorithmic trading such as the high-frequency trading helps in making prices of stocks less volatile and also the cost of the overall trading is significantly reduced.
- They provide the essential liquidity to markets.
Understanding HFT for your business
Understanding the HFTs inside out is imperative to get a clear picture of things. The fear of the ordinary investor getting lost in the maze of high frequency trading is a recognizable one. But it is not a bad scenario altogether. Many experts have an optimistic viewpoint when it comes to HFTs. They are of the opinion that high frequency trading can be beneficial to markets and all types of investors. It is not at all predatory, as perceived by a section of people. This kind of trading has lowered costs along with tightening spreads and adding liquidity to the market.
High frequency trading is a league in itself. This type of trading competes with other entities of the same proportion and not other players which are not in the same league. Automated trading allows many trading firms to scale up. There can be many asset classes, many products, and many platforms. They are also a cost-efficient system so that one can trade well in different places all through the day.
Automated trading systems
Many automated trading systems and platforms are gaining prominence for the convenience that they offer to the traders. One such thing is the Fincrowd app that lets people trade efficiently, even without having a significant knowledge about stocks and trading. It is a supposedly efficient system that provides users many advantages, including making some good profits.