Before I discuss more, you have to read through the ToS from a brokers. Bellow is ICMarkets.
As you can see, HFT is one of the techniques has risk to be suspended.
I won’t say I do HFT on ICMarkets. ICMarkets is one of the best brokers. I won’t do something funny and got suspended. I will try to obey their rule as much as I can.
The key to do HFT, most likely something to do with Arbitrage, News Trading, Low Market Volatility and few others.
The most robust HFT comes from arbitrage. It’s known as the devilish art of making money. But it’s also the easiest method to get caught.
If you know the way to do it, obviously, you can’t share to others. Reason, when a broker know how you do it, they will patch their system then, you no longer able to earn money from the hole.
When you know the hole, you need to use it wisely. Don’t be too greedy, or it will get noticeable and no longer available.
I will share you my past method, so you can imagine how to do it. I wont tell you frankly the method I’m using now. I don’t know if there is broker here. Or you are also owning a broker . If so, I will lost my money engine.
Around 2020, it was an era of arbitrage party in cryptocurrency. Cryptocurrency Centralize Exchange (CEX) were not connected well, so there were many tokens were sold with different prices. Example CEX A sold DOGE from 1.5 USD, CEX B sold 1 USD.
By having the different, we can create a script to monitor price from different exchange. I used python at that time. Monitor few CEX looked for the cheapest asking price, bought them as much as I could and sold them to the highest bidder.
If I monitor 5 CEX, 1 CEX need 1k USD to operate, I will need 5k, 1k for each CEX.
The procedure will be done this way:
- Look for highest bidder and lowest asking price. If it’s not identified, just wait.
- When buy and sell CEX has been identified, system sell DOGE to highest bidder. Keep buying from lowest asking price, transfer to DOGE to highest bidder wallet. Continue as many as possible. In the past, the opportunity window would last for around 15 minutes. During this 15 minutes, we could do at least 50 - 100 rounds trade, depends on network quality. a round gave profit around 50 to 300 USD. Can you imagine ?
- After sell token, USDT from selling will be sent back to source wallet to buy the token again. When the token was ready, it would be sent back for higher bidder.
This is the simple HFT was done in crypto during 2020. You can do this after you know all the cost, latency, window opportunity available. Now this method hardly can be done, since all CEX will do arbitrage to each other, it makes market becomes more efficient.
Can we do this in CFD? Yes of course to some degree and a little improvisation. You need to monitor the price movement, look for spread. Look for the weaknesses. You need to create a script to compare price and find out when the weak spot appear, and how to make use of it.
It’s not an easy way. I need years to find out the spot. When the spot disappear, I have to find other method again. So, the method always changes. You need to know how to code and analyze market properly.