3 ms·
> The programs can gauge market response and, using pre-programmed manoeuvres, called algos (for algorithms), catch the demand before the public (that’s YOU), g
by andylei 17y ago
> The programs can gauge market response and, using pre-programmed manoeuvres, called algos (for algorithms), catch the demand before the public (that’s YOU), grab lots of it cheap, enter and cancel hundreds of small orders in order to find out the public’s limit for a stock’s price and dump all it’s holdings to them at a penny below their limit, but above what the computer paid for it, for a small ($10,000, say) profit, in a matter of seconds.
This isn't flash trading, this is just high frequency trading. All the stuff mentioned in this paragraph about "cheating" has nothing at all to do with flash orders. bellringer seems to suggest that high frequency trading is "cheating". This argument that guys with faster computers and better connections are beating at home traders is nonsensical. If I tried making cars at home in my garage, of course Toyota is going to beat me. They have state of the art factories, trained engineers, and years of experience. Toyota isn't cheating. Similarly, Goldman Sachs, along with lots of smaller guys, has huge computing clusters, blazingly fast and connections and they're going to beat you, a guy with a laptop at home. But it's not cheating.
- known 17y agoHow is it different from http://www.sec.gov/answers/insider.htm http://www.sec.gov/answers/insider.htm
- deleted 17y ago[deleted]
- lsd5you 17y agoDo you really consider that a useful analogy? Cheap cars are useful. A super liquid stockmarket is a zero sum game in which everyone is encouraged to participate but a few sharks basically have extra cards. Its really not obvious why such a responsive market is necessary, it is simply said to be a good thing and a progression, yet it moves at speeds that clearly do not reflect the underlying fundamentals.
- sp332 17y agoWhy do you say the stock market is zero-sum? People put money in & take it out all the time.
- clistctrl 17y agoa "super liquid" stock market as you put it means lower spreads... that benefits you. The people who are losing money because of high frequency trading are algo traders... that is not you (unless you're a hedge fund)
- lsd5you 17y agoYour reasoning is wrong. Limiting the frequency of trades (by some mechanism) does not imply more money going to brokers or higher spreads. (It may effect clearing times, certainty over being able to buy quantities in short times & exact prices). Then the second part is wrong also, as the low frequency traders will lose money, getting on average worse deals. The high frequency traders will make sure you get a worse price, because any price spike you may have fortuitously gotten will be removed. Alternatively you can just reason that the high freq traders are costing money (using resources, making profits) and ergo must be extracting money out of the market. You'll have to make a much better case for the value for such liquidity.
- andylei 17y ago>because any price spike you may have fortuitously gotten will be removed this is true, but "fortuitously" doesn't always apply. "price spikes" could be high or low, and could affect you positively or negatively. with out high frequency traders, it's equally likely that you get a fortuitous or unfortuitous spike. what high frequency traders do is even out prices so that they are always "right". they ensure that when you trade, you aren't trading on some random spike and are instead trading at the correct market price. despite what you think, real low to medium frequency traders enjoy having correct market prices at all times, which is what high frequency guys ensure.