*SCALPSWINGSTRADDLE*

[t43riz]

My understanding of HFT:

Ok so some background real quick, I've been developing a HFT system with a few people from my school (CS guy and a probability theorist) and I've talked to financial engineering professors at length about HFT. The kind of HFT that I semi-understand are algos that use statistical arbitrage. Basically these algos use a high frequency data feed with all the orders included something like a Nasdaq ITCH feed. Taking all these orders they are able to reconstruct the limit order book. They take the order rates for everything cancellation buys sells how many ticks away etc. and run a bunch of calculations based on complex probabilities. So after doing all that they are able to calculate the probability of the price going up by 1 tick and the probability of executing an order before this happens. Some even take into account how their order will affect the orderflow. What they have then is a system that can execute roundtrip trades extremely fast <1s which is way faster than someone manually trading can do. Again this is only one type of HFT and they are way more complex than what I just said but hopefully someone got a better understanding of how they work/ what they try to do