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HFT Forcing Traders to Become More Sophisticated
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HFT Forcing Traders to Become More Sophisticated

  #1 (permalink)
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HFT Forcing Traders to Become More Sophisticated

Brandon Rowley of t3live.com wrote a new blog article about HFT (high frequency trading) today and it is worth reading.

Check it out:
HFT Forcing Traders to Become More Sophisticated ~ T3Live Blog: Daily Stock Market Trading Commentary

In the article, he stresses how the game is changing. But that's always true, look at how different trading is today vs 10 years ago or 20 years ago, the game is constantly changing and traders have to constantly adapt to these changes in order to be profitable.

Lately I feel the platform itself has been a limiting factor in HFT, I am hoping for some new revolutionary platform to come along that greatly improves things for the average trader. Wishful thinking.


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  #2 (permalink)
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  #3 (permalink)
Trading Apprentice
sarasota fl
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Thanks Mike I always find it interesting that the really important stuff like this information goes largely un-noticed by the average trader. You can be be sure that these guys are on the other side of most of your losing trades. And that is only if you know how to trade. Newer traders do not stand a chance against them.

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  #4 (permalink)
Trading for Fun
Dallas TX/USA
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Everyone's scared because they are soooo fast. But, remember 30 years ago you traded by picking up a phone, and calling a broker. Then the broker called down to the floor, who then got someone at the pit to trade for you. And after lots more time you finally heard about your fill. Back then, you traded against floor traders... and it seems to me that their advantage over you, in terms of ability to trade quickly, was far greater than the current HFTs advantage over the daytrader directly connected to the electronic marketplace. The more things change, the more things stay the same...

So I kinda felt like they were just capitalizing on people's fear of the unknown. Let's look at the advice they give:

First, minimize the impact of HFT by trading “in-play” stocks that have large volume from “real” players. Second, avoid non-volatile stocks trading below average volumes.

That has always been the advice when daytrading stocks. Hasn't it? Have you ever heard someone say, "to daytrade well, find a sleepy stock that no one cares about. Preferably find something non-volatile and trading way below average volume."? No way.

Third, greater anticipation based on sound technical analysis is also needed. Most of us will need to fight hard for better prices and avoid the temptation to buy highs or short lows as algos are programmed to manipulate prices around these areas.

... Yeah, because institutional traders have never manipulated prices around those areas before HFT. I guess now we'll need sound technical analysis, whereas we all know that previous to HFT we could just buy and sell willy nilly and make a fortune. Whatever...

Fourth, many of us will need to cut down our size and look for larger moves in stocks. Scalping very small moves is not nearly as profitable when a predatory algo scalps 3 cents from you on your buy and another 3 cents on your sell, just as a hypothetical.

The only advice I saw that rings true to me. Since it's hypothetical I have no idea, but you probably don't want to play the computer's game against the computer. If they are scalping 3 cents in limited liquidity, you don't want to try to scalp the same 3 cents.

Also, levels in stocks are not as clear-cut because algos are programmed to push stocks through the level to shake out weak holders.

Again, obvious prices have always been probed, as long as there has been a professional messing with a retailer. If there's anything new there, the article failed to point it out to me.

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hfts vs little guy

So, is the general message here (for someone still trying to figure out their time frame) that, to not fall victim to high-speed-automated-large volume-algo traders, one needs to not trade based on too short a time frame? If so, what is too short and what is too long, if you just want to trade a couple hours in the morning? I'm talking emini futures....

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  #6 (permalink)
Membership Revoked
British Columbia
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another good read.. Interview With A High-Frequency Trader | ZeroHedge

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