Can tape reading be replaced by algos?
|December 23rd, 2015, 12:22 PM||#11 (permalink)|
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There is a problem with "the algos".
Most retail traders trade directional, outright positions.
So in turn, most retail traders presume that "the algos" are a bunch of machines taking outright directional positions.
So they think they are in competition with "the algos" - playing the same game but on a different timeframe. That's not true.
When people talk about "the algos", they are talking about a scenario they imagine, rather than what is actually occurring.
Think about it. Firms have spent many millions in property & network infrastructure across the country so they can place microwave transmitters that can "see each other", just to be the fastest link between 2 disparate NASDAQ servers so that they can scalp a penny.
At one time, Citigroup was trading around $3 a share with volume over 300,000,000 a day and a 5-6 cent range with rebate trading.
It's mostly some form of arbitrage or market making - it's not them going after your 1 lot on Crude. In short - they aren't your enemy. They are just a damned annoyance when they pull all the liquidity and the ass drops out of the market. In my opinion, it's better trading conditions when they are around and (for me anyway), it gets a bit wild when they disappear.