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I doubt the avg Joe has that much influence when compared to institutional investors.
by deelowe 11y ago
I doubt the avg Joe has that much influence when compared to institutional investors.
- XorNot 11y agoIt's more like HFT which wipes him out. He can't possibly react on the timescales involved, and the market is unlikely to reflect actual business realities compared to the current disposition of several automated financial instruments internal state.
- deelowe 11y agoIs HFT/Robo trading considered passive investing?
- eru 11y agoIf the average Joe picks a few stocks manually, and holds them, how does HFT wipe him out?
- XorNot 11y agoThe value of the stock is divorced from the underlying value of the business. HFT algorithms trade across the breadth of the market - I.e. whether they buy or sell a particular stock is correlated not to expectations of a businesse's books but things like Twitter, news, estimates of other firms positions and the like. So if you're actually trading rather then just collecting dividends (and even then), then whether a stock moves is based less and less on the actual position of the business. Holding them is fine, but index funds are the exact same thing: they're an exercise in cheaply diversifying to the broadest possible scale, which is the only way the little guy beats the algorithmic traders.
- eru 11y agoHFT don't care about the value of a stock in the longer run, they just try to make a market between buyers and sellers.
- icebraining 11y agoHFT algorithms trade across the breadth of the market - I.e. whether they buy or sell a particular stock is correlated not to expectations of a businesse's books but things like Twitter, news, estimates of other firms positions and the like. That's the Castle-in-the-Air theory of investing, and it's been popular for much longer than even digital computers, let along HFT (Keynes is said to invest based on it, and as described the logic in his Beauty Contest analogy). It's why many thousands of investors over a century have been poring over stock price and volume charts, looking to predict where the other investors will put their money and beating them to it. There are certainly algorithms nowadays doing this, but they are certainly not limit to HFTs, and have been around for much longer.