Binary trading is an online monetary trading contract that comes with two payment options at expiration; either a fixed payment or nothing at all depending on the outcome of a trade.
High-Frequency Forex (HFX) is a computational system of trading that executes a large number of trades within a very short time frame thereby making little profits from multiple trades.
Since humans are not fast enough to execute high-frequency trades, it is done by programmed supercomputers that work using binary to search for signals on price movement and then make predictions based on those signals within a very short time frame.
High-Frequency Forex was developed by experienced traditional forex traders, financial analysts, programmers, and software engineers aimed at equipping investors with financial information, tools, and financial services.
Is HFX trading a type of binary trading?
High-Frequency Forex is a form of Binary Options Trading system where already programmed supercomputers working with the use of binary are used to search for signals and predict the outcomes of multiple trades using those signals within a very short time frame.
It involves using a supercomputer to match two different currency pairs on multiple trades and using searched signals to predict a “buy” or a “sell” at an extremely high speed within a very short time frame usually measured in microseconds.
The purpose of the High-Frequency Forex trading that uses supercomputers that make use of binary in its execution is to make millions in profit over the slightest price change in prices of a trade over a fraction of a second.
The outcome of a binary trade or HFX trade is either of two options; either a win or a loss and due to its complex nature, it is primarily used by large financial institutions.
Is it legal to trade HFX?
High-frequency trades or algorithmic traders have been regulated in so many countries globally. It is very important for investors to choose a broker or a platform that has been licensed and authorized by a certified regulatory body.
This is important because licensed brokers and platforms are being regulated and monitored to avoid investors being manipulated or exploited and to avoid fraudulent activities.
An unregulated broker may manipulate the movement of trade in his favor when he is about making a significant loss which results in loss of profits on the side of the investor. This risk can be curbed by trading only with licensed and authorized brokers.
Regulated brokers are also required to have insurance for the funds on their platforms and this ensures the safety and security of an investor’s fund.
Investors are also advised to work with brokers under a Tier-1 regulatory body or agency only like the CFTC in the USA and the CySEC in Cyprus.
Some Regulated Brokers of High-Frequency Forex
They are considered as one of the best HFT trading platforms open mainly to experienced or professional traders that offer a level of 400x on most currency pairs.
They also offer a tight but fixed spread and accept a minimum deposit of 100 USD | GBP and also work in conjunction with MT4 and MT5 which is better suited for experienced and professional traders.
AvaTrade is regulated and licensed by Cyprus Securities and Exchange Commission (CySEC), Polish Financial Supervision Authority (PFSA), Australian Securities and Investment Commission (ASIC), British Virgin Islands Financial Services Commission etc.
Working in over 140 countries under regulations and licenses, eToro is considered one of the best HFX Trading platforms. They offer trades on over 20million assets which include stocks, ETFs, commodities, and cryptocurrency.
They are regulated by the Cyprus Securities & Exchange Commission (CySEC) in Cyprus and Financial Conduct Authority (FCA) in the UK. One of the downsides of this platform is the unavailability of technical analysis and advanced charting.
This is one of the popular HFX Trading platforms regulated by Australian Securities and Investments Commission (ASIC) under Australian Financial Services License number 513393, Financial Conduct Authority (FCA) under register number 793714 and Cyprus Securities and Exchange Commission under the license number 319/17
They accept a deposit of not less than 20 EUR | GBP | USD depending on the user’s region.
They also offer 30x leverage to retail customers and forex trading signals through the use of expert machine learning. Capital.com works in conjunction with MT4 Trading Platform which is better suited for professional traders that prefer the use of technical analysis and advanced charting.
With over 500,000 online users and providing access to over 800 assets and forex pairs, PepperStone is another very popular and reviewed broker for HFX Trading. It also works in conjunction with MT4 and MT5 brokers for professional traders.
PepperStone is also highly regulated by the Financial Conduct Authority (FCA) in the UK, the Australian Securities and Investments Commission (ASIC) in Australia and the Dubai Financial Services Authority (DFSA) in the UAE.
They possess a wide range of options for users to choose from. One of the downsides of this platform is the swap fee imposed on investors.
Tier – 1 Regulatory Agency
Different countries have different licenses and regulatory agencies. Some tier 1 regulatory bodies or agencies around the world are;
- Cyprus Securities and Exchange Commission (CySEC) is based in Cyprus.
- Autorité des Marches Financiers (AMF) basée en France.
- Market in Financial Instrument Directive (MiFID) based in Europe.
- Financial Service Authority (FSA) is based in the United Kingdom.
- The Commodity Futures Trading Commission (CFTC) is based in the United States.
- Financial Market Relation (FMRRC) based in Russia.
Advantages of HFX Trading
Since it involves making multiple trades of assets, traders and financial institutions make large profits from even the slightest price fluctuation and bid-ask spreads.
The speed of High-Frequency Trades causes competition in the market as large volumes of trade are placed and executed immediately and its liquidity causes a decrease in the bid-ask spread thereby making the market more price efficient.
The use of algorithms enables traders to find better market opportunities as it continuously scans for more trades and exchanges.
The risk associated with High-Frequency Trading can be averted by making use of the stop-loss option which automatically closes a trade when it reaches a certain limit and time frame.
Disadvantages of HFX Trading
High-frequency forex traders or short-term traders face more risks than their long-term counterparts. The chances of making a significant loss is greater than that of making potential profits which is normally just half a cent on each trade in High-frequency trading.
Most high-frequency trading makes profits at the expense of their long-term trading counterparts since the use of algorithms can create a sudden spike in the price of trades.
High-Frequency Trading which is a form of binary trading implores the use of supercomputers to place multiple trades which are executed in milliseconds.
Mostly used by very large financial institutions like banks and hedge funds, the supercomputer searches for signals and makes predictions on so many trades at once which either makes millions of cents as profit from each trade.
It is always advised that investors trade with only tier 1 regulated and licensed brokers to avoid manipulation of market prices, loss of funds, and other fraudulent activities.