{"id":1566,"date":"2009-07-25T10:34:53","date_gmt":"2009-07-25T15:34:53","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=1566"},"modified":"2009-07-25T13:31:58","modified_gmt":"2009-07-25T18:31:58","slug":"hft-and-amzn","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/hft-and-amzn","title":{"rendered":"HFT and AMZN"},"content":{"rendered":"

HFT (high frequency trading) has dominated the financial media of late. \u00a0@zerohedge<\/a>, Charlie Gasparino and CNBC, the StockTwits nation<\/a>, @steenbab<\/a>, GMan from @smbcapital, and many other talented bloggers have all weighed in. \u00a0And then came Senator Schumer:<\/p>\n

(from Bloomberg courtesy of @zerohedge<\/a>): \u00a0Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban \u201cflash orders,\u201d saying the transactions give high-speed traders an unfair advantage over other investors.<\/p>\n

Wow!<\/p>\n

For all those heavily invested in adjustments to HFT you cannot ask for a more powerful person to enter the room. \u00a0You have gotten Senator Schumer’s attention. \u00a0Well done.<\/p>\n

I will let others discuss the merits of HFT in length. \u00a0I am not an expert in market ethics or the strategies employed by sophisticated hedge funds and mutual funds employing HFT. \u00a0And I do not decide policy for the securities markets. \u00a0I will tell you though that I cannot get fills that I used to get. \u00a0Programs touch a few shares of my order and immediately cut me. \u00a0I can add there is more trading being done on exchanges that I cannot access. \u00a0This is unfair. \u00a0I have spotted HFT programs that are impossible to beat. \u00a0So I stay clear of them. \u00a0And as I trader I certainly hope the markets offer a level playing field for all of us.<\/p>\n

Look, the players are in the room. \u00a0And this is excellent work done by those who have spoken out. \u00a0Senator Schumer and government agencies handle policy. \u00a0I am a trader. \u00a0I will focus my attention on the adjustments that I must make during this trading period that includes HFT. \u00a0And I hope in this blog to offer a few helpful ideas for traders while this HFT controversy is sorted out.<\/p>\n

Yesterday we had such an example of HFT that I have learned to avoid. \u00a0At 86.60 @smbcapital tweeted:<\/p>\n

if you want a good example of HFT manipulation watch $AMZN around 86.60<\/p>\n

HFT was dominating trading around this level. \u00a0I could not read whether AMZN would trade higher or lower. \u00a0And my charts were not definitive.<\/p>\n

A few times I thought I could read the tape and made plays around 86.60. \u00a0The results? \u00a0A short term short in front of 86.60 ended in a loss of 25c (and my entry and exit prices were much worse b\/c I couldn’t get this seemingly liquid stock at the price I preferred). \u00a0A long above 86.60 ended in a small loss. \u00a0Ok so now I see a pattern. \u00a0The short term longs are losing and the short term shorts are losing. \u00a0And our losses are greater than normal.<\/p>\n

Now I had a choice. \u00a0I could continue to pretend that I could compete against these difficult programs at this price. \u00a0This undoubtedly would have concluded with me giving back all of my gains. \u00a0Or I could choose a different path. \u00a0And so I tweeted:<\/p>\n

a great example also of when we shouldn’t play in $AMZN around 86.60 bc of HFT manipulation. wait 4 it to trend then play. but not now.<\/p>\n

I waited for AMZN to pick a direction. \u00a0Around 86.40 I could read the tape again. \u00a0AMZN was headed lower most likely. \u00a0I reshorted. \u00a0And I caught a nice move down to 85.90.<\/p>\n

HFT makes our trading more challenging. \u00a0There are set ups and time periods we need to avoid, such as AMZN 86.60. \u00a0But trading is trading. \u00a0We look for strong stocks and get long. \u00a0We search for weak stocks and get short. \u00a0Yes HFT shakes us out of more positions. \u00a0Yes it is harder to get stock. \u00a0And yes it would be nice if HFT were not as prevalent. \u00a0But guess what? \u00a0HFT is here. \u00a0And it will only grow. \u00a0So as a trader I must adapt.<\/p>\n

But we as traders can limit their impact through our own trading. \u00a0We can choose not to play when HFT eliminates our edge. \u00a0If you go to a local restaurant and they charge too much for what they offer, then most of us choose not to revisit. \u00a0And we can do the same when we spot HFT. \u00a0If you do not play then they cannot take your money.<\/p>\n

Now that does not mean that adjustments should not be made to HFT. \u00a0There are solid arguments being proffered that changes must occur. \u00a0Manipulation has no place in the markets. \u00a0And we should all have access to the same order flow. \u00a0The market should reward the best traders and not those with an unfair advantage, such as access to exchanges others of us cannot reach. \u00a0But we can all still compete even with all this HFT.<\/p>\n

When we went to 1\/16ths back in the day I heard this was the end of intraday trading. \u00a0When we transitioned to pennies I heard that it was all over for the intraday trader. \u00a0When Hybrid was introduced this was supposed to be the final nail for us. \u00a0When programs entered our markets this was supposed to manifest our dissolution. \u00a0Some traders were forced out during each of these changes. \u00a0But good traders adapt. \u00a0They find new patterns to exploit.\u00a0\u00a0HFT will not be our ruination.\u00a0 It is just another market challenge that we must learn<\/a> to overcome.<\/p>\n

I would like to see some changes made to HFT. \u00a0But you know what? \u00a0If things remain the same, then I will adapt. \u00a0Today I am at the office on Saturday ripping through some charts for excellent set ups on Monday. \u00a0And now that SPY closed above 96.10 on heavy volume, I like the way the market is set up. \u00a0This is a market overflowing with opportunity. \u00a0I will figure out how to make money even with the HFT. \u00a0I am a trader.<\/p>\n

*****Tomorrow I will answer some questions that I have received about Reading the Tape.<\/p>\n

Enjoy your Saturday! Don’t forget to follow us on Twitter!<\/a><\/p>\n

\"AMZN<\/p>\n","protected":false},"excerpt":{"rendered":"

HFT (high frequency trading) has dominated the financial media of late. \u00a0@zerohedge, Charlie Gasparino and CNBC, the StockTwits nation, @steenbab, GMan from @smbcapital, and many other talented bloggers have all weighed in. \u00a0And then came Senator Schumer: (from Bloomberg courtesy of @zerohedge): \u00a0Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban \u201cflash orders,\u201d saying the transactions give … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10],"tags":[228,333,18],"class_list":["post-1566","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-mike-bellafiore-bellas-blogs","tag-amzn","tag-hft","tag-smb-capital","no-post-thumbnail"],"yoast_head":"\nHFT and AMZN | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/hft-and-amzn\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"HFT and AMZN | SMB Training\" \/>\n<meta property=\"og:description\" content=\"HFT (high frequency trading) has dominated the financial media of late. \u00a0@zerohedge, Charlie Gasparino and CNBC, the StockTwits nation, @steenbab, GMan from @smbcapital, and many other talented bloggers have all weighed in. \u00a0And then came Senator Schumer: (from Bloomberg courtesy of @zerohedge): \u00a0Senator Charles Schumer asked the U.S. Securities and Exchange Commission to ban \u201cflash orders,\u201d saying the transactions give ... 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