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Because they'd be buying and selling when there isn't a buyer or seller. Imagine if you could have the house off your hands, at market price, in a day instead
by Mikeb85 13y ago
Because they'd be buying and selling when there isn't a buyer or seller.
Imagine if you could have the house off your hands, at market price, in a day instead of listing it for months. That's b what liquidity does for you. Almost all HFT is market making, there's plenty of information about what that means...
- pkinsky 13y agoI thought the whole point of HFT was to wait for a buyer to signal interest in buying X, and then buy X before that buyer and sell it to him at a slightly higher price. If this is true, then in your scenario you would still have your house listed for months, but a high frequency trader would buy it just slightly before it would be brought without any high frequency traders in the loop.
- kasey_junk 13y agoYou'd think that is true from all the hoopla wouldn't you. But that simple assumption is exactly what large buy side investors want you to think and it is false* *There are some highly predatory algorithms that try to do this. The problem is that if you are fast enough to do this routinely, you are sophisticated enough to do legitimate market making and make more money.
- harryh 13y agoYour understanding of the point of HFT is incorrect. Unfortunately your understanding is a fairly widespread misunderstanding and Michael Lewis book only serves to make things worse. Maybe start here to better understand things: http://www.bloombergview.com/articles/2014-03-31/michael-lewis-doesn-t-like-high-frequency-traders http://www.bloombergview.com/articles/2014-03-31/michael-lew...
- Mikeb85 13y agoThe idea is to buy when there's a seller, then sell when there are buyers. This can mean holding on to shares for seconds or minutes. Yes they seek to make money on arbitrage and predict which way the stock goes based on existing bids and asks, but they are definitely creating liquidity by filling the gaps.