High-frequency trading firms

Is High-Frequency Crypto Trading Right for You?

 

High-frequency crypto trading firms make millions of dollars every year due to their speed, accuracy, and agility. But the question remains: can average crypto traders benefit from high-frequency strategies?

The short answer is yes — but with the right preparation, strategy, and platform.

This guide on high-frequency crypto trading will help you assess whether high-frequency crypto trading is right for you, how to implement high-frequency strategies in your portfolio, and what platforms are best suited to accommodate your needs as an investor or trader.

 

The Basics

While it’s impossible to predict when a new industry is about to take off, cryptocurrency is clearly on a roll. In just six years, more than 1,000 cryptocurrencies have launched, and their combined market cap has risen by at least $50 billion—and perhaps as much as $100 billion—in 2017 alone.

This isn’t an abstract concern: Every day crypto traders are making millions of dollars off tiny price shifts and quick turnaround times.

If you want in on what many believe will be one of 2018’s biggest trades, high-frequency trading (HFT) may be your best bet. But it isn’t easy money, and it’s not for everyone. Here’s everything you need to know before getting started.

 

How These Platforms Work

High-frequency trading (HFT) is exactly what it sounds like. Traders with high levels of capital trade at very high frequencies—sometimes hundreds of times per day.

The goal is to minimize  and maximize returns by making a large number of trades in a short period of time. While HFT is not only related to crypto, some firms are specifically focused on cryptocurrency and blockchain assets.

However, before you decide to participate in these types of services, it’s important to understand what they offer and whether or not their strategies are right for you. In many cases, investors use these platforms as part of their broader portfolio management strategy.

Other times, users employ them more as active traders who rely heavily on technical analysis to execute rapid buy/sell orders based on market data. Regardless of your goals, there are several things you should consider when using one of these platforms:

 

Considerations Before Joining

Before joining any high-frequency crypto trading firm, be sure to do your homework.

If you don’t know enough about crypto markets, it may make sense to consult with a professional financial advisor who can advise you on whether or not it makes sense for you to join a given firm or trade independently.

If a firm is promising unreasonably high returns and can’t lose strategies, consider yourself warned.

The cryptocurrency market isn’t regulated and doesn’t have recourse policies like those in traditional stock markets; if things go south, there won't be anyone else responsible but you. Lastly, keep in mind that anything you do online—including trading cryptocurrencies—carries some .

Make sure you back up your computer regularly and take appropriate steps to protect against cybercrime. For example, install antivirus software and enable two-factor authentication where possible.

 

Who Can Use Them

A high-frequency trading strategy can be applied to any crypto, but a few tokens have more available volume and less market volatility than others. If you’re looking to do day trades, then altcoins such as DOGE and DASH may work better than bitcoin.

However, if you’re more interested in accumulating a long-term position in certain coins, then that is what you should focus on. The biggest factor with your choice will likely be an individual coin’s liquidity; there are some days when bitcoin will not be available because of low liquidity or huge price swings (and so on).

In those cases, it might make sense to trade other currencies instead. Do your research beforehand! Here are some of our favorite exchanges: Coinbase Bittrex Poloniex Bitfinex Binance. There are many others out there—choose one based on your needs!

An investor would probably choose Bitcoin, Litecoin, Ethereum, or another large-cap coin over smaller-cap altcoins due to their lower profile and higher liquidity—this means that these coins would generally provide less volatile returns than small-cap cryptocurrencies.

 

Which Assets These Platforms Support

Some platforms are better with some kinds of assets than others. Some only deal in crypto, while others can move just about anything: fiat currency, stocks, bonds, and more.

If you’re planning to trade lots of different kinds of digital assets and need a platform that can handle everything you throw at it, check out Auxesis (Read Review) or Changelly (Read Review). Both support many different digital assets and have low fees.

However, they don’t provide access to U.S.-based traders. For that, look to Coinmama (Read Review), which supports almost every kind of asset but doesn’t allow customers from certain countries.

Alternatively, if you want a simple way to convert your cryptos into cash, try Bitpanda (Read Review), which is available worldwide but doesn’t offer as many coins as other options on our list.

 

Fees and Minimum Requirements

Cryptocurrency exchanges and trading platforms charge different fees depending on what you’re using them for.

The basic fee structure at Coinbase consists of a base rate of 1.49% per buy, 2.99% per sell, and 0% flat fees when transferring your funds to another exchange or wallet provider. In terms of minimum transaction amounts, you can deposit $1 USD worth of currency at a time on Coinbase.

However, as one of the largest cryptocurrency platforms in existence today, its service is intended primarily for those trading in larger amounts ($200 USD +).

Exchanges like Kraken and Bittrex offer free deposit wallets with varying withdrawal fee structures that generally start around 0.001 BTC (or equivalent) based on volume levels.

Conclusion

It’s not for everyone—in fact, it might not be for most people. It’s definitely not a good idea to try and get into crypto trading if you haven’t done your research about it.

And even if you have researched, that doesn’t mean you should jump in. In fact, a lot of traders actually recommend against it because there are so many  factors involved with high-frequency trading (the main one being your wallet).

If that kind of thing isn’t intimidating to you, however, then maybe crypto is right for you. Just make sure you know what you’re getting yourself into first!