Greetings friends, today we are going to talk about high frequency trading, the HFT we know that in the stock and cryptocurrency markets millions of dollars in assets go from one hand to another, some lose and others win, with the HFT in a matter of seconds They carry out millions of transactions and this is being done by algorithms and bots and not for from flesh and blood people, so it is mathematical algorithms who are making investment decisions. 2 years ago it was calculated that algorithms made 3 out of 4 investment decisions in the United States, although we cannot claim an algorithm if it leaves us bankrupt, it is a situation that is happening.
Since the concept of the market exists, there are intermediaries, high-frequency trading can easily be taken as a form of intermediation, the function of intermediaries in the market is to ensure that there is a buyer for each seller and a seller for each buyer, so that there is liquidation, but in the current and complex market these intermediaries no longer work from banks or in the stock market, now they also work from hedge funds at such a dizzying speed that it becomes difficult to follow.High frequency trading is a form of exchange that uses computer programs, to decide millions of transactions in seconds, in the futures market its use is 50%, in the equity market its use is 70%, its use in the currency market is 40% and 10% in fixed income.
Thanks to the HFT you can know the amount of the Bid Ask Spreads, which are the differentials between offer and demand, it is the difference between the price that buyers want to pay and that that sellers want to receive, knowing these figures allows traders put the best possible price generating profits with the spread, this is called scalping and has a fraudulent version in which the trader manipulates prices.
I think this topic gives much more for which we will continue in a next post, have a happy weekend.
