High Frequency Trading (HFT) – Everything You Need to Know

High Frequency Trading, or HFT, for short refers to a common aggressive short-term strategy used by professional traders who aim to profit from high volatility by executing trades as slow as multiple trades per minute and as fast as doing it at light speed. Here at Dollars Markets, we have received many inquiries regarding High Frequency Trading (HFT) and the Expert Advisors (EAs) associated with it and their usage. However, it is commonly confused for practices of Arbitrage. Don’t worry, we’ll get to this later.

Normally, HFT would need to be carried out at extraordinarily high speeds, and therefore, it is usually associated with different sophisticated software programs and EAs. It requires little interference as it is mostly automated by using low latency programs on a Virtual Private Server (VPS). During HFT, one would find that there are short time frames for opening and closing positions and large volumes of submitted and cancelled orders.

So how does it all work?

Well, it’s fairly simple and straight forward. First of all, you’re going to need to find yourself a program, software, or expert advisor. Once you’ve got that, you will need to get yourself a Virtual Private Server (VPS). I know this all sounds fancy and confusing, so let’s break it down.


An Expert Advisor or EA, simply put, is a trading program developed by other traders or yourself which utilizes a custom algorithm which decides when to open and close a trading position. EAs are primarily used by traders who wish to take the human aspect out of trading. Many have a conception that trading requires emotional stability, and what could be better than basically having a robot to trade for you in that case!

Getting one may cost as cheap as free and expensive as tens of thousands of dollars. You may also try programming one for yourself. Once you have one, you can use your very own strategy and tweak and tune the EA to do your HFT for you. If you want to get a bit more of a comprehensive view and understanding of an EA please read our article (Read Article: Expert Advisors (EAs) – Profiting While You Sleep).


After finding yourself the right EA for you, you may want to invest in a VPS. Not a VPN, a VPS. There is a major difference. A Virtual Private Network (VPN) is a service that masks your online presence, allowing you to be anonymous on the web. On the other hand, a Virtual Private Server (VPS) is a form of web hosting.

Think of it this way, a VPS is basically a cheap form of owning a server. Instead of renting or buying a whole server, you are renting a space in that server. Just like an apartment complex has many units to house a bunch of different people, so is a VPS. It’s basically a computer which hosts a bunch of different computers on one platform. This allows you to get it for cheap prices.

So why would you need it? Why can’t you just host the program on your own computer? Technically, there’s nothing stopping you from hosting it on your own computer. However, there’s only a certain constraint to the reliability of it all. Think of it this way, sometimes your computer messes with your trading in different ways. Maybe one program is sucking up resources, like Google Chrome for example. It’ll suck up your internet usage and RAM amongst other things.

The benefit of using a VPS to host your HFT program, is that it’s reliable and consistent. You won’t have to worry as much about losing out on a trade due to internet disconnections, and furthermore, the most important thing, latency. Ever played an online game and experienced lag because of high ping? VPS allows for a lower risk of encountering lag, which would definitely hinder your HFT. As we already know, time is money and in the world of trading, especially at high frequencies, executing a trade at 9 milliseconds and 20 milliseconds could mean the difference between a few pips during volatile market conditions. So, invest in a VPS.


Yes. Yes, we do. Expert Advisors (EAs) and High Frequency Trading (HFT) is allowed on our MetaTrader 4 (MT4) trading platform. However, we do have a little caveat as we do not allow for arbitrage. I know, there’s a lot of new terminology here, but don’t worry here’s what arbitrage is. Arbitrage is the simultaneous opening of buy and sell positions within a short period of time.

Traders will justify it as using a hedging trading method in order to profit by trading both ways. HFT is highly susceptible to arbitrage, and therefore there is a fine line. We allow for hedging and HFT but not both at the same time, which is basically what arbitrage is. In conclusion, if you’re looking to do High Frequency Trading (HFT), you may do so. Happy Trading!