High-Frequency Trading in Crypto

by Sandip Das from
High-Frequency Trading in Crypto

High-frequency trading in crypto (HFT), which simply means executing crypto trades in nanoseconds, is getting immensely popular. Itโ€™s an effective trading technique for executing profitable trades quickly. As we have more AI-enabled trading tools and platforms, high-frequency trading systems are being increasingly used to leverage the smallest price changes. High-frequency traders use sophisticated HFT algorithms to place and execute HFT crypto trades.

High frequency trading is not a new concept. However, we now have more and more tools to explore high frequency crypto trading. HFT crypto trading allows you to execute trades superfast and benefit from even minuscule price changes. High-frequency trading software applications were earlier mainly accessible to large investors and institutional players. However, they are now available for common investors too. So, what is HFTin the first place?

1. HFT Meaning - High Frequency Crypto Trading Explained

If you look at price charts, you will see prices of cryptos going up and down with every tick. There are not always big price changes. Most tick-by-tick price changes are very small. So, if we want to benefit from these small and frequent fluctuations in price, what trading methods can we apply? Here, high frequency trading comes into the picture, so what is high frequency trading?

HFT crypto trading simply uses advanced computer applications for HFT to place and execute large volume of trades superfast. Because of that, HFT traders can benefit from the smallest price fluctuations.

Also, if they observe a price discrepancy of a crypto in two different crypto exchanges, they can apply HFT to buy from one exchange and immediately sell at the other to make some quick money. For example, if ETH is selling for $1,800 on Binance and for $1800.5 on OKX, you can buy ETH in bulk from Binance and sell the same on OKX. This buy/sell needs to happen in almost real-time and simultaneously so that you can benefit from the price difference. HFT can help you do that before other traders find the opportunity and close the price gaps, and if you want to find out what is Ethereum and how does it work to better understand this example, please click on the link provided here.

There are now a large number of high-frequency trading apps, high-frequency exchanges, and high-frequency trading platforms to make it easily accessible to you. All you need to do is settle for an HFT tool that works for you and keep trading!

2. How to Use High-Frequency Trading?

You can use high frequency trading in cryptocurrencies to execute trades in the smallest fractions of seconds and benefit from small price changes. To use HFT in crypto trading, you need to have access to a high frequency trading bot or a high frequency trading platform.

An HFT bot is crypto trading software powered by Artificial Intelligence (AI). These HFT bots can monitor the market 24/7 and execute high-frequency crypto trades without your intervention. These high-frequency trading bots are run by HFT algorithms, which are a set of smart instructions, to find trading opportunities and execute trades superfast. Traders are increasingly using high frequency algorithmic trading to stay ahead of other traders and get a trading edge, and if you want to know how to use AI in crypto trading, you might want to read our other article.

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Letโ€™s understand this with an example. Suppose, you want to use high-frequency trading in Bitcoins. An HFT bot will help you monitor BTCโ€™s price across multiple exchanges. They can also automatically place and execute trades immediately when there is a difference in BTCโ€™s price across different exchanges to earn some quick bucks.

Also, these bots are designed to place and close trades quickly to benefit from small price fluctuations. Whatโ€™s more? HFT trading bots use technical analysis to find trade signals and place a trade before others as soon as an opportunity arises.

3. High-Frequency Cryptocurrency Trading Strategies

High-frequency crypto trading is simply a style of trading cryptocurrencies to make profits quickly, which is quite the opposite to what investing in crypto is. High-frequency traders donโ€™t hold their trades for long. They are not the typical long-term investors. HFT traders enter and exit trades hundreds or even thousands of times a day to leverage small price differences or a large number of other trading opportunities.

You can deploy a number of HFT crypto trading strategies to up your trading game. Letโ€™s look at some of those crypto high frequency trading strategies:


As you saw in the ETH example given earlier, we can use HFT trading to benefit from the price differences of the same crypto in different exchanges. Simultaneously buying a crypto in large volume from one exchange and selling it on another for a small price difference can give a handsome profit pretty quick.

Small Price Movements

You can use HFT crypto trading to profit from small price changes in crypto. HFT allows you to quickly enter and exit large-volume trades. So, when your volume is high, you can make substantial profits from small price changes using crypto HFT.

New Trade Signals

HFT allows you to generate live trade signals and execute those trades in almost real-time. This gives you an immense edge over other traders managing trades manually or using less advanced systems. HFT crypto trading is a highly potent tool in the hands of new-age traders.

4. Benefits of HFT Crypto Trading

The popularity and uses of HFT in crypto trading are rising day by day because of its unparalleled benefits. Letโ€™s look at the most crucial benefits of HFT crypto trading.

Superfast Execution

First of all, HFT trading allows you to execute trades in nanoseconds. So, you can quickly profit from all emerging trading opportunities and the smallest price changes. Also, HFT allows you to benefit from price differences across exchanges. These types of trades are not feasible in a manual set-up.

Automated Trading

HFT crypto trading bots are designed to execute high-volume trades without your manual intervention. These bots can monitor the market round the clock, conduct technical analysis, observe price patterns, and execute trades effectively. Moreover, the bots don't have human emotions, and because of that you can avoid emotional biases or judgment errors by using these HFT bots.

Trading Edge

Since HFT trading allows you to enter and execute trades as soon as an opportunity is spotted, it gives you a solid trading edge over other traders. HFT helps you take advantage of even the slightest trading opportunities by buying/selling large volumes of cryptos instantaneously.

Increased Trading Opportunities

Not all trading opportunities can be leveraged when execution is slow. Some trading opportunities just pop up and vanish in thin air. HFT crypto trading allows you to detect and execute those trades in a fraction of a second. So, if you have access to an efficiency HFT trading platform, you are going to have many more trading opportunities in a typical day.

Lastly, HFT trading leads to higher liquidity in the market, which makes the market more efficient. As high-volume buy and sell orders are executed rapidly, the overall market volume increases, which benefits all traders.

5. Drawbacks of High-Frequency Trading in Crypto

Despite the large number of benefits, HFT also has certain drawbacks. Here, we list some of the disadvantages of HFT in crypto, so you can have a bigger picture:

  • HFT often leads to wild swings and high volatility in the market
  • HFT can lead to major losses when there are unexpected movements in the markets
  • HFT setups require access to high-end tools and applications, which can be costly.

When it comes to HFT, the most advisable suggestion for beginners would be to adhere to hands-on trading to gain a sufficient levels of expertise first. It is beneficial to acknowledge that high-frequency trading is better suited for institutional investors who are well-versed in market dynamics and adept at handling unforeseen situations while trading.

Having that in mind, beginners might want to initiate their crypto trading journey with day trading first to better understand the basics, such as what are the differences between bull and bear market. They should gradually perfect their tactics, and eventually progress to more complex trading methods, such as HFT.

6. High-Frequency Crypto Trading FAQs

6.1 ๐Ÿ“ˆ How does high frequency trading work in crypto?

In high-frequency trading, high-volume orders are placed and executed in a fraction of a second. We need sophisticated software applications for HFTs. There are many AI-assisted HFT bots for high-frequency trading in crypto.

6.2 ๐Ÿ“ˆ Is high frequency trading legal?

High-frequency trading is absolutely legal. In high-frequency trading, trades are executed superfast using sophisticated platforms or bots, so there is no concern about legality involved here.

6.3 ๐Ÿ“ˆ What is the HFT coin?

HFT coin is the short form of the Hashflow crypto token. This is a crypto asset that you can buy and sell like other crypto coins. Despite the similarity in name, HFT coin is not specifically related to high-frequency trading or HFT trading. High-frequency trading in crypto can be applied to any crypto asset like BTC, ETH, or even the Hashflow coin.

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