Investment Trends

High Frequency Trading

Investing in the stock market seems like yet another get rich quick scheme and that may be part of the drive behind so many on line trading platforms. There are even trading bots that do high volume trading based on certain indicators and these computers tap into the small gains at a high rate of turnover. The creators of high frequency trading are open that this does not guarantee a positive outcome but in the end the profits are coming in.

The mini market crash of 600 points in 15 minutes is being blamed in part to high frequency trading.  Does this now mean that the markets can be under complete manipulation? These super computers are capable of trading a billion shares in a day with a penny or 2 profits as a target.  This essentially means the deck is stacked against the small retail investor who sometimes reacts based on the optics of the stock he is following. These computers are spreading across the US at an alarming rate and the market is being set up to reward those with the best algorithms and the fastest computers it would seem.

Someone has to program the data and it’s not a guarantee but its quick response can buy and lock in profit almost in between someone elses trade. If you have ever played on the US OTC then you are familiar with the MM’s or Market Makers. Well this is just a ramped up version of these market makers. They don’t care about the basic fundamentals or the latest financial reports they simply want to squeeze a coin or two between a flash buy and sell.

The trade off of liquidity is a gray area of transparency that is shadowed over the contents of these super computers and the technology they possess. At what cost will law makers extend the use of these high frequency trading computers? So many books have been written on the signs of a turning market or a breakout ahead of news. All these attributes we have trained ourselves on are lost in this type of trading. My costly education has been trumped by a room full of programmers with little or no knowledge of how good my investment truly is. Although these programs and how they profit is a closely guarded secret I suspect not only trading but shorting could be used as well so that no stock is safe from this manipulation. I am secretly rooting for a programmer who finds the flaw in the programming and creates a scenario that seduces the high frequency trading platform to go all in.