4 ms·

one thing i don't understand is how can you make money by trading every couple minutes? because aren't there fees for every trade.

• albertcardona 19y ago
  go read about subprimes here: http://unqualified-reservations.blogspot.com/2008/01/straightforward-explanation-of-present.html http://unqualified-reservations.blogspot.com/2008/01/straigh... Obviously fees are factored in.
• nostrademons 19y ago
  Most of the folks who do this are the big financial firms who have a direct line to the exchange (actually, I've heard of boxes being colocated in the exchange to shave a few milliseconds off the trade time). They aren't paying retail commission rates. There are still transaction costs though, mostly in the form of the bid-ask spread and the effect of moving the market when you buy or sell a lot of shares. Reducing these transaction costs is big business - one of the main areas that my employer was in was finding "hidden" liquidity where you can trade a lot without materially affecting the stock price.
  • eru 19y ago
    Could you give an example of this hidden liquidity? Seems interesting.
    • nostrademons 19y ago
      It was something my boss did and I wasn't really involved in. As I understand it, though, it involved looking at NASDAQ Level 3 quotes (Level 3 basically gives you the full orderbook, so you have access to all limit orders placed on a certain security) and figuring out which stocks had the largest quantity for sale at a price near the current quote. It may also have had a statistical part to it too - that liquidity technically isn't hidden because it's visible for anyone who pays for L3 quotes, but you can then compare that to actual price movements after a certain quantity is traded, and then estimate what fraction of shares are visible in the order book as limit orders vs. what's sitting in computer algorithms ready to be placed as market orders if the price changes.