Discover How You Can Outperform Manual Traders and other Bots with the Gunbot High-Frequency Trading Advantage.
Get your trading edge and be ahead of the crowd with Gunbot HFT Lightning-fast execution.
In recent years, high-frequency trading and bots are becoming increasingly popular due to the automation and speed they provide. They allow you to control your trading 24 hours a day, and they take over the manual work that would otherwise require you to be sitting in front of a computer constantly.
You can also use trading bots to execute trades at lightning speed with a high level of precision. When you combine Gunbot with your favorite crypto trading exchange, you get a powerful weapon for making profits while you sleep.
That said, let me clarify first that Gunbot High-Frequency Trading is still a work in progress, so allow me to explain HFT in this article and give you a rundown to know what to expect from this superfast trading opportunity.
What is HFT (High-Frequency Trading)?
The use of supercomputers to execute trades at very high speed is called high-frequency trading. In the past, traders made hundreds and sometimes thousands of transactions per second. Lately, with the improvement of computing powers, traders use compelling dedicated computers to make millions or more transactions every second.
By many estimates, HFT accounts for over 70% of transactions made by large companies worldwide. This number speaks volumes about the acceptance of the superiority of bots over ethical trading strategies.
What is Gunbot High-Frequency Trading
Gunbot High-Frequency Trading is a Gunbot operating on WebSockets instead of Rest API.
Don’t get overwhelmed with the concept or thinking about how you will get a hold of a supercomputer. Gunbot HFT is not about that; let me explain.
We use Rest API as our method for Gunbot to gather information and trade on the exchange on your behalf, this is the most commonly used method out there and is implemented by other trading bots as well, but as you may know, Gunbot is always a step ahead, so Gunthar is experimenting with Websockets which are way faster.
Web sockets offer high performance by being better with high loads, their bi-directional nature, and their connection can scale vertically, among other technical things, making it ideal for real-time scalable applications like Gunbot.
What does all that mean to us? SPEED!
Gunbot High-Frequency Trading Scanning all pairs on the Exchange
We have a glimpse of that on our arbitrage bot “bitRage,” and that thing scans the exchanges pretty dang fast 🙂
HFT in Financial Markets
High-frequency trading is efficient and therefore common in the financial markets. Institutional investors spend billions of dollars each year to develop and implement HFT strategies.
In addition, HFT is expanding into new markets like the cryptocurrency market and gaining media coverage. Ordinary traders have to face this power in the market and avoid the pitfalls it sometimes creates.
The reality is that HFT (High-Frequency Trading) helps stabilize the exchange-traded fund (ETF) market by ensuring that the price of funds stays close to the net asset value (NAV) of holdings, according to a news report study.
This should benefit all investors, not just Wall Street professionals.
It is known that High-frequency algorithmic trading reduces the magnitude and persistence of ETF price deviations from net asset value.
These findings are now much bigger than ever, as the HfT market has grown to be gigantic compared to just a decade ago.
Or, to put it differently, if the algorithm keeps the HFT market healthy, the financial market as a whole has a chance to stay healthy.
How does High-Frequency Trading Work?
Traders using HFT create algorithms that analyze stocks and price patterns much faster than anyone else, giving them an edge in spotting new market trends.
Usually, HF traders are not looking to make a big trade but make many small trades, sometimes just looking to spend a few pennies between the bid and ask prices, which doesn’t seem like a lot, but when you do, it’s millions of dollars.
Thousands of operations per day add a lot of money when you keep it consistent.
High-frequency trading became popular after the exchanges began to offer incentives to provide liquidity in the markets, which would later earn them fractions of pennies per share to provide liquidity, which is known to happen under the name of redemption.
So, for example, if you place buy orders at the bid price or below and they are executed on the market, you provide liquidity in the markets where, if you place a buy order on the market, you would withdraw liquidity from the market and do not receive a refund.
What the HFT Speed Relies On
The speed of transactions depends on the proximity of the servers that carry out the transactions. It relies on the transfer of data by light using optical fibers, but it also requires fast and comprehensive direct market access.
High-frequency trading works because large brokers have to buy a lot of stocks to satisfy the portfolios. Rarely can a shareholder or trader supply enough of it, so the broker must buy pieces from multiple traders to fulfill the order.
The time taken allows high-frequency trading platforms to step into the trade, spot the first trade and realize that there will likely be more trades in the stock, buy before the broker can buy, sell to the broker when the purchase order reaches them.
The mark-up can be a few fractions of a cent, but with a sufficiently large transaction, the profit can be substantial and take micro-fractions of a second.
Repeat this several times a day, and the high-frequency trader can make a lot of money.
Whether an individual can profit from it, the answer, for now, is no, because the speed of personal or desktop computers, as well as the distance to commerce, are far that they would be way behind the completion of the trade.
High-frequency Trading Strategies
High-frequency traders never stick to a single strategy and instead use multiple techniques.
As high-frequency traders never hold a single asset for a long time, they constantly make new portfolio-allocation decisions using algorithmic models.
The success of such models mostly depends on whether they can simultaneously process large volumes of data. Most techniques consist of several arbitrage strategies executed at lightning speed and market-making.
HFT execution strategies aim to execute large orders from institutional players with little or no impact on prices.
These include the Volume Weighted Average Price (VWAP) to execute orders at a better average price and the Time Weighted Average Price (TWAP), which is used to buy or sell assets without affecting the price.
HFT Order Flow Prediction strategies: attempt to predict high player orders ahead of time, take trade positions ahead of them, and lock in profits due to the subsequent impact on the high player trading price…
Automated HFT arbitrage strategies: attempt to capture small profits when there is a price difference between two similar instruments.
HFT market maker strategies are necessary to establish a quote (the most recent price at which a portion of the asset was traded) and continuously update it.
Our Market Maker is pretty fast, especially when using the staggered orders strategy, Imagine Gunbot Market Maker on WebSockets!
High-frequency Trading and the Cryptocurrency Market
HFT accounts for more than 70% of orders on the US stock market and is available on crypto exchanges.
To enable high-frequency trading, an exchange needs to offer colocation facilities, which means the trader’s server is placed in the same facility or cloud as the exchanges.
This process has occurred in different asset levels as trading has become more algorithmic. Traders can trade more effectively, which improves price formation, price discovery, and liquidity.
However, good opportunities may become fewer, which is a sign of a more efficient and developing market.
Bots have been present in crypto for a long while, but colocation brings algo trading to a whole new level.
The list of some exchanges that offer colocation services is, Huobi, Gemini, and ErisX. Huobi, for example, stated that one of its clients makes about 800,000 trades a day using colocation. So, HFT trading is now expanding on crypto.
What is the latest version of high-frequency trading?
As already mentioned, HFT is responsible for a large part of the operations that take place in the US and UK. Therefore, after the Knight (Capital Group) incident, e-commerce centers and businesses worldwide have been slapping techs on the neck and making sure their algorithms are working fine.
It is definitely not drawing back due to the huge benefits it provides. In some cases, HFT is the only way out due to the highly fragmented nature of the market, for example, the spot stock market.
Others, who have tested their blood with this method, are ready to go to war rather than stop using HFT.
Why Traders use High-Frequency Trading
The motivation behind using these powerful computers to bid is simple. Computers can overtake humans when it comes to placing bets at super high speed.
For example, suppose a stock is offered simultaneously in two markets with a slight price difference.
With HFT, the trader can buy the right market and sell the expensive market by accumulating profit along the way on each trade. This method has very little to do with fundamental or technical analysis taught in professional institutes.
The biggest complaint with high-frequency trading is its potential to disrupt financial markets within moments dramatically.
However, a good algorithm can be tailored to work with hundreds of coins. Its capabilities are directly derived from the skills of the developer.
Therefore, the HFT created by experienced traders can be adapted to any market or exchange. Moreover, if necessary, they can be changed and improved, making the algorithm perfect for the trader’s needs.
High-frequency Trading Software
There are several ways traders can access HFT, including finding a broker, owning a powerful computer, and installing good software.
Several software suppliers are on the market, but it is worth considering the next steps before you buy quite expensive software.
It would be best if you had a trading strategy in mind because no software vendor will sell you a trading strategy, algorithm, or high-frequency signal. Gunbot comes with predefined strategy settings, but it is up to you to adapt them to your style.
HFT trading is associated with high infrastructure costs, localized servers, high-speed data providers, brokerage fees, etc.
HFT software is not plug-and-play, so you must adopt a lot before you place your first order.
Remember that cryptocurrency trading comes with significant risks. You can suffer huge losses and potentially lose more than what you have invested. If the risks involved are not clear to you, consult an external specialist for independent advice.
All indicators, studies, and trading signals provided on the platform are based on technical analysis.
They are predefined algorithms that use price history, order book status, and other data as input. These tools should only be used in conjunction with in-depth market analysis.
No tool can guarantee future profits or predict market developments with absolute precision.
Benefits of High-frequency Trading
Although market players used algorithms and HFT technology to manage their transactions and risks, their use also clearly contributed to the flash crash in May 2010 when the DJIA fell more than 1000 points in just 20 minutes.
However, a big advantage that some people do not understand is that HFT helps reduce the risk of market instability.
Also, before high-frequency trading, the cost of trading stocks was much higher, and spreads were generally much higher; introducing HFT helped with this. They provided a ton of liquidity in the markets and allowed retailers to trade and participate cheaper.
Below are other benefits of the HFT algorithm.
The robotic nature of this type of trading leads to greater efficiency and better trading. The result is easier and less error-prone trading. Another result is an often dramatic increase in the profits of the trading system made by the company or the individual.
Executing operations manually to maintain a similar level of efficiency would be difficult, if not downright impossible.
Commercial systems like these operate within time frames measured in fractions of a second. It is this extreme speed in decision-making that also makes manual negotiation of such strategies impractical. There are cases when the trader is not at his desk, and the opportunity suddenly presents itself.
In other cases, the residual fear caused by a recent large market loss can sometimes elicit a “deer in the headlight” reaction even from the most seasoned traders.
High-Frequency Trading is not limited to forex or stocks, with a cryptocurrency trading system. The same set of technologies and strategies can be developed, with some minor adjustments, to take advantage of opportunities in markets and worldwide.
Nor is a portfolio limited to a single methodology. An algorithmic crypto trading bot can handle multiple trading systems simultaneously. These systems excel in what is called “high-frequency trading.”
Gone are the days of browsing yesterday’s charts. HFT algorithmic can make real-time trading decisions with current data as it arrives. Humans cannot compete with a high-speed algorithmic trading bot.
Algorithmic crypto trading systems facilitate your access to vast reserves of liquidity, thereby improving overall execution time and accuracy.
HFT algorithmic trading bot help with money management, also known as trade size or simply “position sizing.” The eternal question has always been to buy or sell.
But the astute trader knows that the question of how much to buy or how much to sell may be more important than being long or short. Position size requires calculating complex formulas, which can only be done by computer if one has a realistic chance of trading algorithmically.
An HFT crypto bot analyzes real-time market data to make buying and selling decisions and calculate how much to buy or sell short accurately. This enables the next step in a complete automated trading strategy: risk management.
Suppose you have successfully figured out when to “enter a trade.” That is when to buy or sell a particular coin pair. Suppose further that you have also determined exactly how much to buy or how much to buy.
Neither responds although they do participate in helping answer the question “when to go out.”
A logical and consistent exit strategy is required before entering a trade.
If you try to decide in the heat of the market when to close a trade, you are simply inviting disaster.
Before opening the trade, one should carefully and cautiously determine what exactly needs to happen to trigger the liquidation of the position. If your trading turns positive, so much the better. Making money is good.
However, if your trade goes against you, the question is. “How much am I prepared to lose on this trade?”
Suppose you decide not to lose more than 2% on a trade. It is essential to know precisely when this loss threshold of 2% has been reached.
Conclusion High-Frequency Trading Algorithm
Cryptocurrency trading algorithm is basically trading crypto with bots. Bots are computer programs that allow you to buy and sell cryptocurrency at the right time. Its objective is to generate income for its users and ensure that they will benefit in the long term.
Bots carefully observe market conditions and execute trades based on predefined algorithms. It should also be pointed out that you are free to make your own settings, which will help you to perform various operations.
This software responds almost a thousand times faster than a human, so its operational efficiency is questionable.
Expatiating on Gunbot in this section, Gunbot is useful and can trade in a matter of milliseconds. Speed depends on the number of coin pairs you are trading. This bot can follow trends and execute when it is profitable to buy or sell something according to your settings.
Once all the conventionalities have been done, you can move to the installation procedure. In fact, you can get a trading bot by resorting to one of the following options:
- Get it for free through an open-source platform
- Get a paid version of a licensed bot like Gunbot
Let’s recap 4 benefits Gunbot has over humans.
- Speed: There is no doubt that bots run a hundred times faster than humans
- Resilience: Bots can trade 24/7 without interruption
- Capacity: Gunbot can process gigabytes of data per second
- 100% Objectivity: Bots are not subject to emotions of any kind. They do what is asked of them.
As you can see, cryptocurrency trading bots are beneficial and multi-functional, allowing you to generate a lot of profit.
Just keep in mind that to give them a full game, it is highly recommended that you analyze the details of the bots. And then run to all your chances to benefit from this nifty technology.
So there you have it, that’s all I believe is important for you to understand and prepare you with the basic knowledge for the upcoming Gunbot High-Frequency Trading Feature. Are You Ready? Take Gunbot Now and Start Profiting.