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identify HFT

  #15 (permalink)

London, UK
Posts: 29 since Sep 2016
Thanks: 1 given, 29 received

garyhi View Post
Can I identify HFT is going on during the day by looking at my /ES chart? Using NT7, rather a newbie. Thank you.

Hi Garyhi,

I have been managing a book of high frequency trading for 2 years on futures (bund, bobl, schatz), as well as on spot FX as liquidity provider. Whilst HFT on stocks is very different than on Futures, I have enough experience to answer your question with facts and not random thoughts.

1) the Futures market is very centralized, meaning that if you want to trade E-Mini S&P 500, there is only 1 place to trade it, as opposed to stocks and FX, where you can deal with multiple venues, dark pools, inter dealer brokers etc.

The main arbitrage HFT try to do is between different venues, so when looking at futures, you will not have "ultra high frequency" traders that try to arbitrage latency and need microwave tower platforms to be faster than cable-connected computers.

2) HFT is not bad for you. At least in the futures space. HFT in futures is essentially people who have a strategy that trades very low time frames(think about a moving average crossover on 1 tick data instead of 1 minute or 10 minute candlesticks) and have an average trade profit below 1 tick. Hence they cannot execute by using market orders and need to get filled using Limit orders.

So if anything, that gives you liquidity.

The myth that HFT makes money everyday is only true when dealing with latency arbitrage, HFT traders in Futures do not make money all the time, far from it. They make a bit more money than position traders and intraday traders but have very limtied capacity and usually can't manage more than 100m$, making it not very interesting for half the hedge fund industry.

Hope this helps.

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