Advanced HFT Detection with VWAP & Spreads

Explanation of the HFT Detection Strategy
🔹 1. Key Indicators Used in the Strategy
It's works by combining VWAP, moving averages (SMA), volume spikes, and price jumps to detect potential HFT activity.

✅ (A) VWAP (Volume Weighted Average Price)
VWAP acts as a benchmark price that professional traders and institutions use to execute large orders.

If price is above VWAP, buyers are in control → Bullish trend

If price is below VWAP, sellers are in control → Bearish trend

HFT algorithms often place buy orders above VWAP and sell orders below VWAP to follow momentum.

➡️ Why VWAP? It ensures that signals follow the institutional trading trend.

✅ (B) Moving Averages (SMA)
Moving averages smooth out price data and help in detecting short-term momentum changes.

Fast Moving Average (5-period SMA): Reacts quickly to price changes

Slow Moving Average (20-period SMA): Identifies trend direction

➡️ Why SMA? It filters noise and confirms short-term trend shifts.

✅ (C) Volume Spike Detection
High-frequency trading is often accompanied by large volume surges. We define a volume spike as:
📌 Current Volume > 2× Average Volume of last 20 bars

➡️ Why Volume? HFTs execute rapid buy/sell orders when they detect liquidity, leading to sudden volume bursts.

✅ (D) Price Jump Detection (Sudden Volatility)
HFT algorithms often exploit quick price movements. We check if the price has moved more than twice the ATR (Average True Range) in the last 5 bars.

➡️ Why ATR? It helps to detect abnormal price movements compared to normal volatility.

🔹 2. Trading Signal Logic
Now that we have VWAP, moving averages, volume, and price movement filters, we generate buy and sell signals based on conditions.

✅ (A) Buy Signal Condition
A BUY signal is triggered when:
✔ Fast SMA crosses above Slow SMA → Short-term trend is turning bullish
✔ Volume spike occurs → HFTs are active
✔ Sudden price jump detected → High volatility
✔ Price is above VWAP → Confirms bullish trend

➡️ Why this works? It confirms that institutional traders & HFTs are buying aggressively.

✅ (B) Sell Signal Condition
A SELL signal is triggered when:
✔ Fast SMA crosses below Slow SMA → Short-term trend is turning bearish
✔ Volume spike occurs → HFTs are selling aggressively
✔ Sudden price drop detected → High volatility
✔ Price is below VWAP → Confirms bearish trend

➡️ Why this works? It confirms that institutional traders & HFTs are selling aggressively.

🔹 3. Visual Representation (Plotting Signals & VWAP)
Once we detect buy and sell signals, we mark them on the chart.

✅ (A) Buy/Sell Markers
🟢 Buy → Green upward arrow below the candle

🔴 Sell → Red downward arrow above the candle

✅ (B) VWAP Line on Chart
We also plot VWAP as a blue line to visualize trend direction.

✅ (C) Highlighting Volume Spikes
To easily spot HFT activity, we highlight volume spike bars with a blue background.

🔹 4. How to Use This Strategy?
1️⃣ Apply this script on a 1-minute or 5-minute intraday chart.
2️⃣ Look for BUY signals above VWAP and SELL signals below VWAP.
3️⃣ Verify that the volume spikes before taking action.
4️⃣ Use stop-loss & risk management (e.g., stop-loss at recent low/high).

🚀 Summary: Why This Strategy Works?
✅ VWAP ensures we follow institutional traders
✅ Volume spikes confirm sudden liquidity inflows
✅ Price jumps detect fast market moves caused by HFT bots
✅ Moving averages smooth out short-term trend shifts