Is HFX Trading Worth it?
High frequency forex trading (HFX) is a type of Forex trading. It is a type of algorithmic trading characterized by high speeds, high turnover rates, and high order-to-trade ratios that leverages high-frequency financial data and electronic trading tools, says experienced trader — Rowan Relton.
How can you tell if high-frequency FX trading is a good fit for you? As you go through this, there are a few things you should ask yourself.
What Algorithm Will You Use for HFX Trading?
Isn’t it the computer that’s doing all the trading? As a result, it stands to reason that your trade will only be as good as your algorithm. If you are an expert computer programmer who knows precisely what you want, creating your own high-frequency forex trading (HFX) algorithm will cost you nothing.
What Are You Spending?
Because high-frequency trading is all about data, you may need to hire a data supplier. The cost of these might begin at $5,000 per month. You may then require a dedicated server, which might cost up to $2,000 per month. That might be around $8,000 per month if you’re collocating that server to decrease latency between exchanges. And that’s before you consider the software, which may cost up to $10,000 each month depending on what you use. Assuming you can manage everything alone and don’t hire any type of super crew, we’re looking at a minimum of $25,000 each month.
What’s Your Starting Capital?
High-frequency forex trading has razor-thin profit margins. It’s a numbers game, not a lottery victory. If you have a lot of money at your disposal and are employing leveraged trades, those razor-thin margins matter a lot more.
The initial expenses for high-frequency forex trading are considerable, as we’ve just discussed. You must be making at least as much as you are spending, which could be as much as $25,000 per month. If you only have $10,000 to begin with, it’s doubtful that you’ll be tripling that amount every month in order to make a profit.
Have you heard the expression “it takes money to earn money?” That, in essence, refers to circumstances like these. The top ten percent of hedge funds get a 15 percent annual return. This indicates that to be a full-time trader, you’ll need roughly 20 times your annual expenses in order for your yield to pay your costs, recommended by Rowan Relton. Of course, you don’t need that much to get started — but with the hefty beginning expenses of high-frequency forex trading, you’ll need a lot of money to stay in the black.
Advantages of HFX:
Provides market liquidity
Tightens spreads
Reduces arbitrage
Not affected by major market changes
Consistent profit with minimal human effort
