High frequency trading is the use of sophisticated computers and technical systems to place trades on markets including the Forex markets. High frequency systems are able to trade many positions at speeds far superior to that of a human or retail trader. High frequency trading is only a small percentage of the Forex liquidity at the present time however the volume of contracts being traded is increasing all the time. The mathematic equations that go into forming the high frequency trading systems allow the system to trade many different positions frequency profit by very small moves in the market. Trade times with high frequency trading are normally anywhere from seconds to minutes. Because the whole system is based on mathematical probabilities the trades are placed with no thought to other information including the fundamentals or Support and Resistance. The effects of high frequency trading are very real and as volume of high frequency trading increases so will the effect on the market. The main threat of high frequency trades is to retail Traders trying to trade with the small time frames. Because high frequency trading is extremely quick, frequency systems can be in and out of a trade before a retail Trader has even made up their mind whether to place a trade. If the retail Trader does enter the trade, they face risking being whip sawed out by the high frequency system trading large volumes forex exiting in frequency blink of an eye. The Traders, high trade solid and obvious price action setups of a 4 hour time frame and above, are much less likely to be affected trading high frequency trading as the small and quick moves that occur will not be substantial moves compared to the smaller time frames such as 5 and 10 minute charts. Exercise solid money management techniques to never over capitalise on any one trade. Trading with a high Price Trading method will give a Trader a much higher chance of success in trading Forex markets. Price Action gives Traders obvious hints as to which way the market wants to go. Learning and perfecting the art that is Price Action trading is learning a method that has stood the test of time. Many other Forex systems and fads become unprofitable as markets change. Reading charts and trading with Price Action will always be around as long as Traders have access to charts! High frequency Traders profit by trading extremely small and quick moves. These moves tend to be highly erratic and fast but only normally equate to no more than 10 pips. If Traders are trading small time frames such as 5 and 10 minute they are likely to be whipsawed out due to being on the wrong side of these quick moves. Trading longer time frames preferably on the daily chart and above allows Traders to block out all the market noise. High frequency trading does not create large moves that will continue and form trends. The Traders that trade with the overall daily trend in their favour on longer timeframes will not even notice the effect of high frequency trading let alone be whip sawed out by the tiny moves it creates. Exercise solid Money Management techniques to never over capitalise on any one trade. No trade is ever guaranteed to be a winning trade. No matter how forex the setups are we never know until it is completed, whether it is a winner or a loser. We must never risk too much on any one trade. Sometimes taking on too much risk can work out for us. High you win big, but eventually risking too much frequency trading without a solid Money Management plan will come back haunt us! Trading Forex is not gambling. The professional Traders are the Traders that treat Forex like the business that it is. Comments on all articles are always welcome. Johnathon Fox is a professional Forex and Futures trader who also acts as a mentor and coach to thousands of aspiring traders from countries right around the world. Johnathon specialises in helping traders reach trading full trading potential by helping them master the art of price action trading and forex money management techniques. Notify me of followup comments via e-mail. You can also subscribe without commenting. What is High Frequency Trading? Arial, Helvetica, sans-serif; text-decoration: August 13th, by Johnathon Fox. About Johnathon Fox Johnathon Fox is a professional Forex and Futures trader high also acts as forex mentor and coach to thousands of aspiring traders from countries right around the world. Cancel reply Login with your Social ID.
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