Best Practices For High Frequency Trading With Crypto

Nov 3, 2021

To meet the new demand from institutional investors and attract HFT companies that have introduced a lucrative new source of income, several cryptocurrency exchanges have introduced low latency features and adaptable trading platforms equipped to handle fast, high volume orders.

These exchanges also compete with companies that conduct cryptocurrency exchanges or pay to place their trading robots inches from the exchange server, reducing latency.

High Frequency Trading (HFT) is an automated trading strategy which utilizes decision algorithms, supercomputer power and low latency trading technology to capitalize on inefficiencies in the market prices. HFT trading began long before the first cryptocurrency was introduced, and now up to 80% of transactions are carried out using this method in some asset markets besides long-term trading and arbitrage.

Simply put, computers used for high-frequency trading are programmed to host sophisticated algorithms that scan every cryptocurrencies on multiple exchanges in a millisecond continuously. The algorithms are created by trading experts and are designed to identify trends and other trading triggers that other traders cannot observe, no matter how professional they are. Typically the algorithms used by high-frequency traders are designed to filter these price moves and trade on the opposite side.

However, proponents argue that the liquidity provided by HFT transactions brings great benefits to ordinary traders thereby neutralizing inequalities between market participants. Nevertheless, proponents of HFT trading believe it provides liquidity and stability in the cryptocurrency market. In particular, large scale trading and institutional-sized investments can pose a threat to the cryptocurrency market due to the smaller market size and associated sensitivity.

Many trading strategies appear profitable for cryptocurrency traders, but some promise an advantage over others. While there are many tools for experienced traders to invest in cryptocurrencies and make a profit, new investors are forced to settle for multiple solutions to meet their trading needs. Perhaps traders should begin with daily cryptocurrency trading, gradually hone their strategies and eventually move on to HFT trading.

Trading bots involve developing a specific strategy, designing an appropriate program to execute it, and then continuously monitoring, testing and updating algorithms to keep up with changing market conditions. By using trading robots like Crypto Genius, investors can ensure that their investments are working around the clock and profitable without having to constantly monitor and analyze the market. While some individual traders use trading robots, the level of automation in crypto markets is hardly comparable to traditional assets.

With around 60-80% of all trades by high-frequency traders, China conducts most of its cryptocurrency trading using algorithms. The trading algorithm used in Crypto Genius is designed to trade bitcoin and other crypto cryptocurrencies by implementing high frequency trading strategies. By implementing high-frequency trading strategies the Crypto Genius automated trading bot can execute a large number of trades in a short time and bring higher profits than traditional trading methods expressed in the marketplace (with additional references from Caporale et al.

In this study, we analyse high frequency data (5 minute intervals) from the cryptocurrency market to determine if algorithmic trading really exists 24/7 or if there are still people sitting on their computer with hand after returning from daily work (Figure 1).

The liquidity and volatility are key to any day trading strategy, so any cryptocurrency with sufficient liquidity which exhibits high volatility can be a good option. These new products and services are providing additional income for cryptocurrency exchanges, many of which have been fighting the retail volume declines that match the crypto bear market, thus they will try to slow the exchange of information that confuses the broker’s algorithms and causes most investors to lose the ability to make trades without paying an explicit HFT commission.

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