Unusual Prices Are A Better Bet In An HFT Dominated Market

I was trading FCX this morning.  I noticed a clear buyer at 60.90 during the Open.  In the late morning the buyer dropped and I got short.  FCX traded down about 30 cents over the next ten minutes.  It then did a bit of a short squeeze up to 61 before trading down to its opening price of 60.20

From my perspective by far the best trading opportunity that occurred in FCX was one hour later when it clawed its way all the way back to 60.90.  What an amazing opportunity to get short and risk only 10 cents with 2+ points of upside.

Here is why I think this was the best opportunity presented in the stock today.

  1. The 60.90 level is not at price such as a whole number where HFTs would be focused on pushing the stock above and below the level, in order to take money from the silly day traders who would be focused on such a level for no other reason than it is at the “fig”.
  2. The stock has already proven it can have a significant move off of this price based on the earlier 70 cent down move
  3. The risk was clearly defined by the earlier squeeze that couldn’t get FCX to trade above 61
  4. The entry price was far enough away from the opening low that even if FCX didn’t break down today the risk/reward was better than 1:5 on the trade
  5. There was a clearly defined downside target of almost two points based on Friday’s afternoon resistance of 59

US equity markets are completed dominated by HFTs.  I believe in peaceful co-existence and therefore will focus on trades where I know they are least interested.  They are faster than me so I find trades where speed is not determinative.

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