Learn about forex trading techniques at http://www.DailyFX.com High frequency trading in the forex market High-frequency trading (HFT) -- whether institutional or individual -- has two key characteristics: • Short portfolio holding periods • Portfolio-allocation decisions made by computerized quantitative models This video workshop will discuss forex high-frequency trading strategies for individual investors. High-frequency trading strategies In high-frequency forex trading, forex traders use algorithms to move in and out of short-term positions to capture sometimes just a fraction of a cent in profit on every trade. HFT traders do not employ significant leverage, accumulate positions or hold their portfolios overnight; they typically compete against other high-frequency traders rather than long-term investors. As a result, HFT has a potential Sharpe ratio (a measure of risk and reward) thousands of times higher than traditional buy-and-hold strategies. This makes it appealing to a certain type of trader. The success of high-frequency trading strategies is largely driven by their ability to simultaneously process volumes of information, something ordinary human traders cannot do. Specific algorithms (also known as "algos") are created to profit from simple arbitrages which could previously have been performed at lower frequency -- things like Competition in forex high-frequency trading tends to occur though who can execute the fastest rather than who can create new breakthrough algorithms. Computer processing speeds and server latency are issues HFT traders must consider. However, high frequency forex trading for individual investors Is different than institutional trading. Individual investors are limited in their trading capacity when compared to financial institutions, and as a result, there are some techniques individual investors can implement when trading the major currencies on an intraday basis. Day traders should look for currency pairs with tight spreads, and take a position when there is a high level of depth in the market to avoid slippage. Assessing the times when market liquidity is high can help fill market orders quickly, which could help to avoid missing a profitable opportunity. Start a conversation with one of our analysts about high frequency trading on Twitter; https://twitter.com/DailyFX
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Duration: 49m 38s
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