Andy Webb Freelance writer
Andy Webb Freelance writer

High frequency automated FX trading

The concept of automated trading has attracted rapidly growing interest in recent years. Andy Webb looks at a key focus for this growing interest which is high frequency autotrading.

First Published: e-Forex Magazine 17 / Retail Forex Client / January, 2005

The concept of automated trading has attracted rapidly growing interest in recent years. In certain markets, such as exchange-traded futures, it has already become an everyday fact of life. In others, such as interbank spot FX, the party is just beginning to get underway.Irrespective of the specific market, a key focus for this growing interest has been high frequency autotrading. While technology advances have certainly been a factor in this, another major driver has been the inexorable decline in transaction costs.Lower cost, higher frequency Assume for a moment that the average profit per trade for a trading system should be at least ten times the cost of trade execution. On that basis, a fall in transaction costs from $50 to $5 cuts the minimum acceptable profit per trade by $450 - from $500 to $50. This makes it viable to deploy trading systems with a smaller profit target per trade but a higher trade frequency. Typically such systems will also be using very short timeframe prices (e.g. single ticks) as...continued

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