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High Frequency Algorithmic Trading / Flash Trading

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  • High Frequency Algorithmic Trading / Flash Trading

    It used to be, that the average investor didn't have a chance in the stock market because the institutions and robber barons who were "in the know" were always one step ahead of us. "They" were selling while we were still buying.

    Then of course the advent of the computerized age, drastic reduction of transactional costs (low low commissions) and the lightning fast spread of information across bulletin boards and the INTERNET changed all that, until by the mid to late 1990s the average Joe didn't even need a full service broker and could make as much money as anyone else. There was no longer any edge for one investor versus another.

    But that seems to be changing again. With the advent of high frequency algorithmic trading, traders using batteries of computers that are not available to you and me are able to shave bits and pieces off stock trades that add up to billions of dollars - end sums that are taken from other traders' pockets in much the same way that a given day trader cannot make a buck unless a dollar is ripped from the pocket of another trader.

    What is algorithmic trading a.k.a. flash trading?

    The World of High-Frequency Algorithmic Trading

    Arrest Over Trading Software Illuminates a Wall St. Secret - The New York Times

    We may be looking at the rippling of the playing field again - making it all once again an uphill battle for the individual investor. Especially the day trading investor who thinks he is bringing a six shooter to a knife fight, only to find his opponent armed with a Howitzer.
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  • #2
    Flash trading

    S.E.C. Seeks to Ban Computerized ‘Flash Trading’ - The New York Times

    Proposals Ban ‘Flash’ Trading and Put New Limits on Rating Firms

    WASHINGTON (AP) — Federal regulators on Thursday proposed new rules designed to stem conflicts of interest and provide more transparency for Wall Street’s credit rating industry, which was widely faulted for its role in the subprime mortgage debacle and the financial crisis.

    The S.E.C. commissioners also proposed a ban on “flash orders” — a practice that gives some traders a split-second advantage in buying or selling stocks. It has become a hot-button issue in recent weeks amid questions about transparency and fairness on Wall Street.
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    • #3
      Supposedly the HFT (High Frequency Trading) firms have lost their luster for a while now.

      Bloomberg - Are you a robot?

      And in any case, my trading has been successful and beaten the robots consistently. A human being seems to be better at predicting the emotions that drive a market better than a computer.
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