I am writing an article for SFO magazine on HFT (High Frequency Trading) and its effects on the markets. For me the most glaring change are the plays that no longer work. Specifically paying for a new high in a stock and playing for upside momentum. Too often the result of paying for the new high is a seller sticking the offer, and then coming sharply low offer, causing the short term longs to hit the bids lower. Ripper. We can this the Sell the New High Program. A mirror image of this program is placed into the market for a stock that hits a significant low.
My question to our readers is: What effects do you see HFT having on the markets? What changes have you made to your trading as a result?
This article will be published in SFO magazine and then I will discuss this article and HFT in greater detail on my Sunday night show on StockTwits TV.
7 Comments on “HFT and the Effects on the Markets”
Hello, SMB members, Hello, Bella, Hello, Steve,
HFT is beginning to have impact here in the Brazilian market, specially in the form of “noise” in the intraday price time series. Once upon a time the charts were straight and beautiful – nowadays mostly noise and sudden moves.
The only way around that was to focus on price leves such as Round Numbers and in volume-price relationships.
Regards,
Newton Linchen,
Brazil.
Hello, SMB members, Hello, Bella, Hello, Steve,
HFT is beginning to have impact here in the Brazilian market, specially in the form of “noise” in the intraday price time series. Once upon a time the charts were straight and beautiful – nowadays mostly noise and sudden moves.
The only way around that was to focus on price leves such as Round Numbers and in volume-price relationships.
Regards,
Newton Linchen,
Brazil.
Stocks like C, CIT, and LVLT are blaring examples of HFT traders effectively “becoming marketmakers” and making a killing by playing the spread and banking ECN rebates. I also see the ever-annoying “peg” orders that continue to one-up your bids/offers by a fraction and cause you to lose your execution when someone hits “market.” And in general, I see the HFTs make it hard to play momentum, because price action becomes so volatile even in very obvious setups. Some traders just back up the the larger time frames… but it’s really annoying for those of us who still rely on those 1-minute charts that are now littered with HFT. It’s reality, and I’m adapting, but the noise and the stop-outs can be frustrating.
Stocks like C, CIT, and LVLT are blaring examples of HFT traders effectively “becoming marketmakers” and making a killing by playing the spread and banking ECN rebates. I also see the ever-annoying “peg” orders that continue to one-up your bids/offers by a fraction and cause you to lose your execution when someone hits “market.” And in general, I see the HFTs make it hard to play momentum, because price action becomes so volatile even in very obvious setups. Some traders just back up the the larger time frames… but it’s really annoying for those of us who still rely on those 1-minute charts that are now littered with HFT. It’s reality, and I’m adapting, but the noise and the stop-outs can be frustrating.
This is not even a new problem, it started years ago, but is now quite obvious even to the slow witted.
In effect they HFT boys are running an anti gaming program against scalpers and day traders. And it’s not just HFT, its buy and sell programs that deliberately bob and weave in a random manner.
The net effect is , you cant make a dime without risking a dime or more. It was never easy, but it used to be easier.
This is not even a new problem, it started years ago, but is now quite obvious even to the slow witted.
In effect they HFT boys are running an anti gaming program against scalpers and day traders. And it’s not just HFT, its buy and sell programs that deliberately bob and weave in a random manner.
The net effect is , you cant make a dime without risking a dime or more. It was never easy, but it used to be easier.
Traders are probably only the latest victims of advances in computer intelligence. MorganStanley has contracted with IBM to use IBMs Watson to “to sift through piles of financial data to spot the next big thing, potentially more efficiently than highly paid Wall Street analysts” Watson can read million of pages of documents, in a second. So Aanalysts, you’re next. This the next evolution in quant funds.