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It's weird how this "providing liquidity" distraction never seems to go out of fashion. HFT provides liquidity if you happen to be another HFT algorithm. Otherw

It's weird how this "providing liquidity" distraction never seems to go out of fashion. HFT provides liquidity if you happen to be another HFT algorithm. Otherwise, not so much. Why would short term investing be bad, and how long do you think HFT algorithms hold their "investments"? I hope you're not just trying to blow smoke up my ass here.

cmdkeen 13y ago
It isn't just about liquidity, though it does. But it also reduces the bid/ask spread, i.e. price discovery. The HFT trader may make a tiny profit when it processes a trade from me, but I've benefited because I can buy/sell at a price close to the quoted exchange price, which didn't use to be the case. In terms of liquidity those trades are available to all, they love buying from non-HFT trades because they can make a small profit from their less accurate pricing. You benefit from the lower spreads and that liquidity. Before HFT you'd have paid a greater cost due to the spread on the price. Short term investing is "bad" because you're not investing in the future success of the company you're trading on the basis of what you think the market is going to do. To the extent to which that is ever knowable it is unlikely you have the skill, experience and data to be able to beat the large number of professionals doing it.
- white_devil 13y ago
  It sounds like you work for the financial industry too. > The HFT trader You say it like it's a person making trades. > I've benefited because I can buy/sell at a price close to the quoted exchange price, which didn't use to be the case. What's a "quoted exchange price" if it's not the price you actually pay? > Short term investing is "bad" because you're not investing in the future success of the company you're trading on the basis of what you think the market is going to do. Isn't this what HFT is all about? Trading on insider information is bad, of course. But if you're on a level playing field, I don't see anything wrong with profiting from something you correctly predicted short-term.
  - cmdkeen 13y ago
    I do - but a 'proper' long term investor that cares about the price in 20 years time. The quoted exchange price is an average of the buy/sell offers available, there is no guarantee if you try and trade that you will pay that amount. Especially if you are shifting large blocks of stock. There is nothing wrong with "short term predicting" but it isn't investing. It is often a very easy way to lose money, "bad" doesn't just mean morally so. It comes down to time horizons, how much you want to make, and how many people are also trying to predict that event. You can correctly predict that event and still not make money as it is already priced in.
  - TheCoelacanth 13y ago
    > What's a "quoted exchange price" if it's not the price you actually pay? The actual price you have to pay is based on how much you want to buy and how much other people are willing to sell at what price. People who want to buy give a "bid" price and people who want to sell give an "ask" price. Whenever there is an ask price that is lower than a bid price, a sale takes place. This results in the lowest ask price always being higher than the highest bid price. The quoted exchange price will be somewhere in between the two prices. If you want to sell right away, the most you can get is the highest bid price on the books. If you want to buy right away, the cheapest you can get it is the lowest bid price on the books. This means that you have to pay more than the quoted exchange price to buy and receive less than the quoted exchange price to sell.
  - tome 13y ago
    > What's a "quoted exchange price" if it's not the price you actually pay? The mean of the bid and the ask, generally. For a daily close price it can be a fifteen-or-so minute average thereof.
- zygomega 13y ago
  Investing in company stock is much more about investing with a global pool of liquid capital seeking risky asset exposures these days. When global capital changes it's mind (in whatever direction) those watching the market closely will be the first to know and the first to profit from the market signal. You can go broke investing in companies that look like they have a bright future.

cmdkeen 13y ago

It isn't just about liquidity, though it does. But it also reduces the bid/ask spread, i.e. price discovery. The HFT trader may make a tiny profit when it processes a trade from me, but I've benefited because I can buy/sell at a price close to the quoted exchange price, which didn't use to be the case. In terms of liquidity those trades are available to all, they love buying from non-HFT trades because they can make a small profit from their less accurate pricing. You benefit from the lower spreads and that liquidity. Before HFT you'd have paid a greater cost due to the spread on the price. Short term investing is "bad" because you're not investing in the future success of the company you're trading on the basis of what you think the market is going to do. To the extent to which that is ever knowable it is unlikely you have the skill, experience and data to be able to beat the large number of professionals doing it.

white_devil 13y ago
It sounds like you work for the financial industry too. > The HFT trader You say it like it's a person making trades. > I've benefited because I can buy/sell at a price close to the quoted exchange price, which didn't use to be the case. What's a "quoted exchange price" if it's not the price you actually pay? > Short term investing is "bad" because you're not investing in the future success of the company you're trading on the basis of what you think the market is going to do. Isn't this what HFT is all about? Trading on insider information is bad, of course. But if you're on a level playing field, I don't see anything wrong with profiting from something you correctly predicted short-term.
- cmdkeen 13y ago
  I do - but a 'proper' long term investor that cares about the price in 20 years time. The quoted exchange price is an average of the buy/sell offers available, there is no guarantee if you try and trade that you will pay that amount. Especially if you are shifting large blocks of stock. There is nothing wrong with "short term predicting" but it isn't investing. It is often a very easy way to lose money, "bad" doesn't just mean morally so. It comes down to time horizons, how much you want to make, and how many people are also trying to predict that event. You can correctly predict that event and still not make money as it is already priced in.
- TheCoelacanth 13y ago
  > What's a "quoted exchange price" if it's not the price you actually pay? The actual price you have to pay is based on how much you want to buy and how much other people are willing to sell at what price. People who want to buy give a "bid" price and people who want to sell give an "ask" price. Whenever there is an ask price that is lower than a bid price, a sale takes place. This results in the lowest ask price always being higher than the highest bid price. The quoted exchange price will be somewhere in between the two prices. If you want to sell right away, the most you can get is the highest bid price on the books. If you want to buy right away, the cheapest you can get it is the lowest bid price on the books. This means that you have to pay more than the quoted exchange price to buy and receive less than the quoted exchange price to sell.
- tome 13y ago
  > What's a "quoted exchange price" if it's not the price you actually pay? The mean of the bid and the ask, generally. For a daily close price it can be a fifteen-or-so minute average thereof.
zygomega 13y ago
Investing in company stock is much more about investing with a global pool of liquid capital seeking risky asset exposures these days. When global capital changes it's mind (in whatever direction) those watching the market closely will be the first to know and the first to profit from the market signal. You can go broke investing in companies that look like they have a bright future.