If I want to be a High Frequency Trader, what do I need to have in place and How much would it cost?

Hey Salman,

This is a very vague question. However I'm trying to list out the best I can:

  • Co location at the Exchange servers to ensure faster execution of orders.
  • State of the art computers with the best possible hardware configurations
  • Proper approvals from the regulatory authorities
  • Adequate certifications
  • Brilliant Strategies
  • Proper risk control measures
  • Access to company news from providers like Bloomberg etc.

The cost would be subjective to a lot of factors like the country you are trading in, distance for co location etc.

9 Likes

Hello Salman,

I partially admits Venu Madhavan, he rightly pointed out but prioritize order is something like this

  1. Proven Strategy.

  2. Max Draw down Risk Mgmt.

  3. Software & hardware setup

  4. Contingency for system failure. (like broadband fail, hardware crash in mean-time)

rest there is long list but most important are above 4

1 Like

Hi Salman…I would agree with what Venu said.Just adding my 2 cents…

As you may know, any sort of high frequency trading (irrespective of the strategy you adopt) involves buying and selling large, really large quantities of shares for a very small profit per trade.Typical High Frequency trader would probably do few hundreds, if not more number of trades per day…now the problem is, you need to have a trading strategy to ensure your hit ratio is positively skewed …consistently. In order to develop and deploy such a strategy you need deep pockets, awesome infrastructure and huge appetite for risk.

High Frequency Trading (HFT) is like saying that you are gonna drive a high speed Porsche Carrera GT in the most crowded area, each and everyday of your life and bet on the fact that your automobile is gonna be scratch free! Now that’s a tough ask isn’t it?

Warren Buffet famously quoted “HFT is like picking up a nickel while standing in front of a bull dozer”. I think it brilliantly sums up the HFT scenario.

Having said all this, HFT can be a very rewarding career choice, especially if you do it right. DE Shaw, Renaissance, Citadel, GS etc are few great places to be if you are in HFT business.

Good luck.

11 Likes

Check out the below link for complete details on High frequency trading:

hElLO tRaDeRs,

A good blog for traders researching into HFT and ALGo in India.

By the way, you can start by reading “Inside the Black Box” by Rishi K Narang. Gives you a brilliant perspective into what needs to be done in order to get into the HFT arena.

1 Like

Thanks for the recommend, Karthik… just read "Flashboys’… made my head spin.

1 Like

I;ve not read Flashboys…but sounds interesting :slight_smile:

1 Like

Bumping up this interesting post in 2021

I would like to know if there is any upper cap beyond which it is considered to be HFT?
For e.g in a minute, there are 60 seconds, so if a HFT software does more than 40 trades per minute then will it be considered as an HFT - any such hard limit?

Secondly, let’s say I opted to use Kite Connect API and start HFT (say 50+ trades per minute), do I need to have any additional permission from anywhere?

Thirdly, what’s the latency of one trade when directly bought at market price vs. when a pre-created GTT gets triggered at the same time - consider both happening from Kite Connect API?

only a shallow account. no detailed workings of HFTs. much hype less details.