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Not many brokers can facilitate high-frequency trading due to its demanding condition. How is this strategy treated differently than the rest and why OANDA can manage to allow it?
Over the years, traders have been able to come up with different strategies in order to enhance their chances of having profitable trades. One of these strategies is called high-frequency trading. Here is all you need to know about this controversial strategy, and how OANDA provides the space to apply it.
What is High-Frequency Trading
High-frequency forex trading refers to doing a very high volume of deals and completing those trades in milliseconds. Because a human being alone cannot accomplish these speeds, this tactic must make use of specialized computer systems to be successful.
The high-frequency trading method uses several different algorithms to anticipate when the market is likely to move before it actually does so. Because of this method, the markets become very liquid for a brief period of time, which might lead to confusion among other traders. Therefore, if you ever come across a brief period of extremely high liquidity, a high-frequency trading may be in play.
OANDA for High-Frequency Trading
OANDA is one of the very few brokers that allows users to perform high-frequency trading. This trading platform provides you with both REST and FIX APIs to enable you to make the best decisions for your trading account by creating perfect trading strategies that work for you.
In order to perform high-frequency trading with OANDA, you need to first create an account on the platform. After creating your account, choose an API you want to use to perform high-frequency trading, and request for your API token to enjoy trading.
Traders looking for brokers with accurate precision, OANDA can be an option. That is because OANDA is a broker that provides quotes with 5-digit accuracy and active price movements that follow market developments. Order execution speed is also faster in this broker.
It provides benefits for novice traders, as they can trade with smaller volumes using the calculation system based on currency value, unlike other brokers adopting the lot system.
Founded in 1996, OANDA was built by Dr. Michael Stumm who is a lecturer in Computer Engineering at the University of Toronto, Canada, along with his colleague, Dr. Richard Olsen of The Olsen Ltd., which is one of the leading econometric research institutes. They have a head office in San Francisco, United States.
OANDA branch offices can be found everywhere. Some of these offices are located in the United Kingdom, Singapore, Japan, and Canada. With this number of offices spread, OANDA has increasingly attracted the attention of clients worldwide.
OANDA's company is registered under several well-known jurisdictions in financial trading. They are regulated by CFTC and NFA in the US, FCA in the UK, ASIC in Australia, and many others. Traders do not need to worry anymore about security when trading in OANDA. However, these advantages make trading rules at OANDA more stringent compared to other brokers.
For example, OANDA only allows maximum leverage of 1:20, because the rules in the US and Japan do not allow leverage above that. Besides, the registration procedure is more complex due to various additional requirements that are not submitted by other forex brokers. On top of that, hedging is not allowed in one trading account as the client must open an additional account to hedge.
Nevertheless, OANDA is known for being a leading broker with many advantages offered. OANDA faces increased market risk during periods of price volatility, such as economic and political news announcements. When market spreads increase or decrease, their pricing engine widens or narrows spreads accordingly. That way, traders can get the latest conditions from price movements in the market more quickly.
Prices move very fast in the market. Especially when news releases have a large impact on market volatility. This condition is often exploited by brokers to take advantage of clients with Requotes. However, traders do not need to worry about additional costs when trading with OANDA.
The company never withdraws Requotes so traders can get maximum profit. When traders are unavailable to monitor open positions, they can set take profit orders to lock in profits and Stop Loss orders to help protect against further losses.
As an experienced and well-known online forex broker, OANDA is committed to maintain an efficient trading environment that reduces latency and provid tools to help clients manage the degree of acceptable slippage.
With a fast & reliable trading platform by OANDA, clients' trades are executed in 0.012 seconds. This suits traders who choose brokers based on execution speed.
Because of this exceptional execution service, it is not surprising that OANDA won many awards, including the winner of the world's Best Retail FX Platform at the prestigious e-FX awards. The broker is also voted number 1 for Consistency of filling trades at quoted prices, Execution speed, and Reliability of platforms.
There is no minimum deposit or minimum balance required to open an OANDA account. Deposit and withdrawal can be done easily. OANDA provides a variety of payment method facilities, including Paypal, Wire Transfer, Credit Card, and Debit. Traders can adjust it to the region where they live.
OANDA provides more than 100 trading instruments, including 71 currency pairs, 16 indices, 8 commodities (Brent Crude Oil, Copper, Corn, Natural Gas, Soybeans, Sugar, etc.), 6 Bonds, and 23 Metals.
The fxTrade and MetaTrader platform are available at OANDA. These platforms can be used for Desktop and Mobile. Another plus is they have an OANDA Technical Analysis that exists in collaboration with a technical analysis provider called Autochartist.
With these platforms, clients can monitor price movements easier and automatically recognize patterns created on charts, as well as receive alerts when the awaited patterns appear. Access to this technology can be enjoyed free of charge.
In conclusion, OANDA is an ideal broker for traders in need of fast execution backed by many years of experience. The company is also a good alternative for those looking for a well-regulated broker with flexible trading and deposit conditions.
Benefits of High-Frequency Trading
It seems to me that there is a good explanation for the widespread use of this tactic. No one is going to invest a significant amount of money in a computer system if they are unsure whether or not the plan will even be lucrative. One of the major advantages of high-frequency forex trading is that it considerably improves market conditions by making the market more liquid.
This, in turn, enhances market stability. When the market is liquid, the money from orders may be transmitted more effectively. This results in a reduction in spreads and may also in the elimination of arbitrage opportunities. Even if we wouldn't dare confess it to our ancestors, robots have unquestionably contributed to making our lives a great deal simpler.
Drawbacks of High-Frequency Trading
It is essential to keep in mind that high-frequency trading is not suitable for all investors in the foreign exchange market. Because of this, the practice is typically carried out by major corporations and other types of organizations that don't have anything to lose.
This method is unfair to the other participants in the market since it demonstrates that it is impossible to compete in the same game if you do not have sufficient financial resources. The rapid execution and completion of many deals contribute to the market's severe volatility due to this factor. It is possible for the market to abruptly collapse, which would result in the remaining participants suffering significant losses without their knowing.
As a retail trader, it's wise to always be careful of unpredictable price movements especially when it's caused by big players' actions like high-frequency trading. Apart from that, there are also some market manipulations that you should be aware of.
25 Comments
Naim
Jan 11 2023
Hi have you personally tried using HFT at OANDA? I would love and really appreciate if you can contact me on this.
Driscya
Jan 23 2023
Naim:
Hi, I can't find your contact so I'll reply it here. Been trying OANDA's High frequency trading (HFT) for a while. Based on my personal experience, it has several pro's and cons.
The pros are:
1. You don't need to worry about liquidy because HFT can add liquidity to the markets by providing more buying and selling options for investors.
2. You get a faster execution, which can be beneficial for traders looking to take advantage of short-term market movements.
3. Since the spread is reduced, you'll get a lower costs.
But still, you should consider the Cons, such as:
1. High volatily...sometimes it's even too high! Because HFT allows traders to rapidly buy and sell large quantities of securities
2. Risk of flash crashes, or sometimes people said it as "slippage".
3. It lacks of transparancy and may advantage big firms over individual investors
Overall, HFT has its pros and cons, it can be beneficial for traders looking to take advantage of short-term market movements, but it can also increase volatility and contribute to flash crashes.
Sally Harmon
Jan 25 2023
Driscya: 'You don't need to worry about liquidy because HFT can add liquidity to the markets by providing more buying and selling options for investors'
I don't really understand these words. What does it mean by adding liquidity and how does it affect my day-to-day trading? Sorry if this question is odd, I am still very new in trading and there are a lot of 'big words' that I don't get.
Karim
Feb 19 2023
Sally Harmon: Liquidity means you can get any order you want, be it Bid or Ask instantly. To have this liquidity, the market must have a high trading frequency. SO if the market only buys and doesn't sell it won't become liquid because when the asset's range is limited, the asset won't have shares to execute a buy order as all stocks are in long position, this allows all traders that open buy position will not get what they want and this will drive the price up when the asset is out of stock.
BUT, if the market can balance buying and selling, then both buyers and sellers can still open positions when available.
SO with HFT it adds more buying and selling transactions, increasing their volume to create a liquid market
Bruno
Feb 19 2023
Man, I read about high frequency trading. And I think using this method is not right at all, especially for small traders. Imagine, people with enough money can use this HFT strategy just to move the market at will if possible.
This will cost us money, as a small trader, because HFT users can drive the market away from us. I think it is not fair to enable this as a trader with little capital. Of course I will predict the market movement because I have no power to move the market but only HFT users take the position, the market suddenly leaves my position and I am losing money because of them'
it is more likely to be a zero-sum game guy. It's not fair at all
Harry
Feb 19 2023
Bruno: I agree with you. This method seems very complicated because you need a lot, a lot of money to move the Forex market a little bit. And it will cost us the money that we opened earlier. I also think it's not fair to have this at OANDA, especially a broker that has a lot of retail traders with small capital.
However, believe it or not, the forex market also has high frequency traders. I mean hedge fund company, and also speculator. It is all in the forex market and the movement is also affected by it. SO without OANDA High Frequencies Trader too, The Forex can always be unpredictable due to big whales in Forex and we have to be very careful with the chart and that is the risk in Forex that we cannot avoid
Theo
Feb 19 2023
Forget about the unhealthy competition caused by high frequency traders or I can say speculators. I think provide high frequency traders it means OANDA is very good broker with many features that can even support high frequency traders. I mean with a very large order, OANDA clearly needs to be professional to execute the high frequency trader's trade.
I am curious about OANDA, how can I deposit and what leverage can I get and what is the minimum amount required to open an account at OANDA. And especially since it is regulated by the US, I think the transaction will be extremely safe! And of course the OANDA's money management aslo top management because can regulate from US!
Joshua
Feb 19 2023
Theo: This is the statement I wanted to write in the comments. The forex market is a unified market with many large whale companies that if they move could affect the entire forex market. So without OANDA HTF, other high frequency traders will influence the Forex market. I mean many large institutions like central banks, major banks, hedge companies, hedge fund companies and many financial companies participate. And you can guarantee that the forex market will always be predictable, especially if it moves. This will affect the entire market.
About OANDA, you can deposit from $1 and with unlimited maximum leverage. This means you can have more freedom and you can adapt to the trading conditions with your money.
Diego
Feb 20 2023
I like to read articles related to trading brokers and yeah I am quite interested in OANDA brokers. even though I'm still a beginner in trading, I just feel this broker is good at trading.
As a market-moving broker, OANDA offers trading on four instruments: Forex, indices, commodities, and precious metals. Although only 38 Forex pairs are available and only the MT4 trading platform is supported, this broker offers three account types. Available accounts are Demo Account, Standard Account, Core Account, and Swap Free Account for Muslim clients.
However, I have never heard of high-frequency trading (HFT). what is the use of this HFT for trading on OANDA? and what do traders use HFT for? You know, guys, I'm still new to the world of trading. If anyone understands HFT, please help explain...
Harrison
Feb 20 2023
Diego: High-frequency trading (HFT) refers to a type of algorithmic trading system that makes multiple trades throughout a trading day in a very narrow time frame.
Standard algorithmic trading programs can execute hundreds of trades per day, while HFT systems can execute thousands of trades in a matter of seconds. Typically used by institutional or professional traders, HFT systems use complex mathematical algorithms that quickly analyze market prices and news events to identify trading opportunities.
As far as I know, OANDA Broker uses HTTP-based REST API. The OANDA REST API is language-agnostic, enabling traders to their preferred programming language to integrate directly into the OANDA legacy and v20 trading engine. This API is ideal for individual traders who like to automate their trading strategies.
HFT systems also demand tremendous computing power and require sophisticated high-frequency trading software. This high-powered trading program can open and close trading positions in just microseconds.
Lalisa
Feb 20 2023
I actually don't like trading with high-frequency trading (HFT), even though I'm also an OANDA user. I admit that OANDA is good and safe for trading because it is licensed and trader funds will be kept in a separate bank account.
But I still don't like this HFT. as it is known. I know that HFT Systems move fast. High-frequency trading systems are able to react quickly to market movements and global news events that can impact the market.
However, the drawback of this HFT is that the computer system is not perfect. HFT algorithms and systems may be complex, but they don't make perfect decisions. In particular, they may not have the sophistication to determine whether market-moving events are genuine, and they may not always react appropriately to volatility.
HFT isn't for everyone either. A large number of technical skills are required to successfully develop and maintain an HFT strategy.
Robert
Feb 20 2023
Lalisa: Despite the disadvantages you describe HFT, High-frequency trading, along with trading large amounts, allows traders to profit from even very small price fluctuations. This allows institutions to earn significant returns on the bid-ask spread.
The trading algorithm can scan many markets and exchanges. This allows traders to discover more trading opportunities, including brokering slight price differences for the same asset as it is traded on different exchanges.
Many proponents of high-frequency trading including myself also argue that it increases liquidity in the market. HFT definitely increases the competition in the market as trades are executed faster and trading volume increases significantly. Increased liquidity causes the bid-ask spread to decrease, making the market more cost-effective.
Tabitha
Feb 20 2023
High-Frequency Trading (HFT) is an asset trading strategy in which traders don't hold assets for long, usually not more than a day with the profit from each trade being very thin but made in large amounts. The strategy is executed quickly by the computer. HFT is usually used by investment banks, hedge funds, or institutional investors to transact in large volumes and at high speeds (up to milliseconds) on the stock exchange.
From the description of this article, this OANDA platform provides you with REST and FIX APIs to enable you to make the best decision for a trading account and a sound trading strategy. Financial institutions can use encrypted Financial Information eXchange (FIX) channels to access the OANDA Trade platform. OANDA supports FIX 4.2, 4.3, and 4.4.
But there are a few things that I'm still confused about, how can traders get access to the OANDA REST API? Is there a fee to access the API? If there are friends who understand this, please help explain...
Reynarl
Feb 20 2023
Tabitha: The OANDA v20 REST API provides programmatic access to OANDA's next-generation v20 trading engine. To use this API, you must have a v20 trading account, which is available for all divisions except OANDA Global Markets. The REST API is programming language agnostic. You can use any of your favorite programming languages ​​to interact with our system. Also, to make things easier, we have a number of programming language wrappers available on our OANDA Developer Portal.
Free API access with a sufficiently funded OANDA online trading account.
Yanuar
Apr 8 2023
Pardon my french, but I got no idea at all how this hi frequency thingamagic nonsense going to work for retail traders like me. Is this method actually accessible to us, retail trader? Cuz the more I read it, the more I got confused.
Does Oanda offer any educational resources or support for beginner high-frequency traders? I heard that this method can produce huge profits in relatively short amount of time, idk if it's true, but I really like to learn it as well, but in a more simplistic, step by step methods that beginners can understand... in English...
Catelya N.
Apr 8 2023
Can I try this high frequency trading method in a demo account? I'm not sure if I can get this API or whatever they call it gonna work... Do I need special requirements before accessing this feature?
Chaplhin
Apr 26 2023
I've heard a lot about OANDA which is said to be friendly to novice traders, but I still don't know much about OANDA. Every novice trader, in my opinion, definitely likes trading at relatively low prices because they still don't have much experience in trading. but low cost is the second factor for me in recovering the trading platform, safety in trading is also an important aspect I say. because the more regulations that this broker can get, the more traders feel safe depositing their money.
In your opinion, is this broker worthy of being called a safe broker? if anyone knows who can help answer yes... thank you.
Pollin
Apr 26 2023
@Chaplhin: hello guys, I also want to help answer, is the OANDA broker safe for trading activities? My answer is that it's not too safe either. because apart from being regulated by more than 7 international regulators, there is something this broker lacks, namely negative balance protection. OANDA Global Markets Ltd does not offer negative balance protection, so traders may lose more than they invested.
but the positive side of this broker is that trader funds will be kept separately. So, if you want to consider this account as your trading broker, that's fine, but you can learn more to avoid doubts.
Raghnaid
Apr 26 2023
@Pollin: OK, friends, I want to help explain a little about the security of our account at OANDA. In my opinion, OANDA is one of the forex brokers that has been in this field for a long time because it started operating in 1997. wow, that's quite a long time in my opinion, because most forex brokers just started around the 2000s. Now for OANDA's own regulator, the good news is that it is regulated by 8 top-level international regulators, namely:
Galaxy
Apr 26 2023
@Chaplhin: OANDA is generally considered a safe and reliable forex broker. It is regulated by several financial authorities, including the National Futures Association (NFA) in the United States, the Financial Conduct Authority (FCA) in the United Kingdom, and the Australian Securities and Investments Commission (ASIC).
Having multiple regulatory bodies oversee its operations provides an additional layer of protection for clients' funds and helps ensure the broker operates transparently and in compliance with industry standards.
However, like with any financial service, there is always some level of risk involved, and traders should always thoroughly research a broker before investing their funds. Additionally, it's important to implement risk management strategies and never invest more money than you can afford to lose.
Hamilton
Apr 26 2023
I actually like trading with this OANDA broker because the customer support from this broker is very fast and responsive, especially when compared to the complex trading software available from other brokers. In addition, the educational features are very supportive, especially for beginners who are just starting trading. OANDA provides great customer training along with great research.
Unfortunately, we only offer currency pairs and forex trading to US traders who are unable to use all of the trading instruments on offer. This is the limit for American traders who like other commodities. As many traders know, cryptocurrency and CFD trading is becoming more and more popular among traders, especially nowadays. i really don't like it.
Issabelle
Apr 26 2023
@Hamilton: Wow, wow, that means you missed this hot news from the OANDA broker. Okay, well, let me tell you that at the end of October 2022, American traders will be able to access Cryptocurrency trading instruments. The broker announced the launch of a new cryptocurrency trading offering on the US market, designed to provide investors with easy access to crypto alongside their existing forex portfolio in a secure environment.
As you have explained, cryptocurrency trading is very popular among traders these days, and OANDA has established itself as a trading provider with access to cryptocurrency trading for its US customers.
Everything from opening a Paxos account to funding to trading is managed within the app so investors can seamlessly access major cryptocurrencies such as Bitcoin, Ethereum and PAX Gold against the US dollar from an intuitive platform.
Even though US traders have not been able to access CFD instruments, the OANDA broker has proven its reliability by adding access to crypto currency instruments in America (US). and this is a good move from this broker to provide easy trading for its customers, especially those in the US. Maybe in time OANDA will also be able to get access to CFD instruments. Nobody knows about this.
Seung Gi
Apr 26 2023
@Issabelle: Yes, I also heard the news. At this time, I think OANDA is also a good broker for cryptocurrency trading. The launch of this offering is an opportunity for merchants to engage cryptocurrencies and smartly with brands they can trust.
Cryptocurrencies emerged from the counterculture of wanting to trade currencies that were not regulated by a central bank and were not affected by national currencies or major economic events. However, the interest of traders in cryptocurrency trading is actually increasing year by year. For this reason, OANDA is ready to increase the demand for cryptocurrency trading by making cryptocurrency accessible to all traders, including US traders.
Oh, and remember that OANDA has years of experience and an unparalleled record of offering trading in foreign exchange and other derivative products worldwide. Paxos, OANDA's crypto partner, is a leading provider of regulated blockchain infrastructure.
The functionality offered by the OANDA app goes beyond simple 'buy and sell', allowing traders to set limit and stop order parameters in their account to take profits and limit losses on their positions.
Andrea
Nov 19 2023
Hey, the article is crystal clear about high-frequency forex trading – it's all about executing a massive number of deals at lightning speed, like in milliseconds. I need to iron out a couple of things, though. Firstly, what type of trading exactly calls for this high-frequency approach?
Secondly, is this kind of trading comparable to gambling? I mean, the article hints that the speed of high-frequency trading is beyond what humans can handle alone, requiring specialized computer systems, just like what OANDA is offering in this piece. I'm looking for some insights on that. Thanks a bunch!
Juno
Nov 23 2023
Let me answer your question :
High-frequency forex trading involves swiftly executing a large number of deals within milliseconds. Now, addressing your questions: Firstly, the type of trading that necessitates high-frequency techniques often includes algorithmic trading strategies, where automated systems analyze market One of the most traders know is Algorithmic Trading where Algorithms are employed to analyze market data and execute trades based on predefined criteria. HFT is a crucial component of algorithmic trading, enabling rapid decision-making and execution.data and execute trades at an extremely rapid pace.
As for the comparison to gambling, it's a nuanced topic. While both involve risk, high-frequency trading relies on sophisticated algorithms and specialized computer systems, like the ones OANDA offers, to navigate the speed and complexity of the market. It's more about leveraging technology and quantitative analysis rather than relying solely on chance, distinguishing it from traditional gambling. The key lies in the strategic use of technology to gain a competitive edge in the fast-paced world of forex trading. To know more about HFT, you can simply read in this article : High-Frequency Trading: Pros, Cons, and Controversies
Hope it can clarify all your doubt about HFT.