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What future for individual traders/investors?, with "Legalised Scalping"
Brierley
post Posted: Apr 2 2014, 01:44 PM
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There's a lot of rubbish on CNBC but this debate over HFT from last night is worth a watch.

QUOTE
Brad Katsuyama, IEX; William O'Brien, BATS Global Markets president, "Flash Boys" author Michael Lewis; and CNBC's Bob Pisani, debate high-frequency trading and the perceived unfairness in the public exchanges.


http://www.cnbc.com/id/15839263

or direct link to video

http://video.cnbc.com/gallery/?video=3000263252

 
Brierley
post Posted: Mar 31 2014, 01:49 PM
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New Book out on HFT's

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It's extremely rare that a book can unsettle Wall Street.

But later today the newest book from major US writer, Michael Lewis, will be published. It's already available on pre-order on Amazon (analogue print and ebook download).

You can bet the orders have been busy because the pre-publicity for the book has been the heaviest I have seen for any book on the markets for decades.

Limited reports about Lewis' new book - called "Flash Boys: A Wall Street Revolt" rattled through Wall Street on Friday night, our time - capping a week or so of rumours.


http://www.sharecafe.com.au/sharecafe.asp?a=AV&ai=29411


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flower
post Posted: Jul 30 2012, 02:40 PM
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In Reply To: veeone's post @ Jul 30 2012, 02:15 PM

QUOTE
The loss of trust in the financial markets is at an all-time low


Hear Hear thumbdown.gif



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veeone
post Posted: Jul 30 2012, 02:15 PM
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The perils of high frequency trading
July 30, 2012 - 1:06PM
Adele Ferguson
Business columnist

A report released in the US on Friday into high frequency trading (HFT) has set the cat among the pigeons in the global equities markets as it challenges a number of studies that say HFT cuts costs for investors.

The report, released by Pragma Securities, has gone viral on the internet, as it picks up on a share trading phenomenon that remains a mystery to regulators and retail investors.

The old-fashioned idea of an exchange as a physical place where people come together to buy or sell shares is long dead. So too is the definition of what constitutes long term. Trading technologies are making it possible to buy and sell shares in milliseconds - or even picoseconds, which is one trillionth of a second.

It has now become a technological race for relevance and survival. In the US more than 50 per cent of stockmarket volume is now based on high frequency trading, which involves trading shares in small parcels at speeds that are almost at the speed of light. In Australia, HFT is a relatively new phenomenon but some estimate that it accounts for more than 20 per cent of volume.

Advertisement Regulators around the world have been concerned that markets are being manipulated by computer trading, and many blame the May 2010 flash crash in the US on HFT. That was when the Dow Jones fell 1000 points, or almost 10 per cent, only to recover within minutes. Automated trading has grown rapidly in recent years as equity markets have fragmented across multiple venues and proponents of high-frequency trading say that more liquidity is being pumped into these venues, benefiting all investors.

The report argues that some of the most heavily traded US stocks might also be among the most expensive to trade. It puts a figure of $US2.5 billion a year on the cost to investors.

The theory is that stocks that are most popular with high frequency traders, including Bank of America, Microsoft, Cisco Systems and Ford Motor Company, make it hard for long-term investors to quickly buy and sell the stocks, which raises the costs.

"In contrast to the academic consensus view that high-frequency trading is benign, our research shows that there's a significant cost to the liquidity that they're providing," said Pragma Chief Executive David Mechner. Pragma is a research and trading firm.

The report flies in the face of the typical argument that HFT reduces trading costs by making it easier for investors to buy and sell and it illustrates that costs initially fall as trading volumes rise but as average volume continues to rise, so do the costs and time to execute.

In Australia, where trading is drying up due to a lack of real volume in the actual markets, HFT can virtually push the market, or stocks, to positions, where it wants.

The loss of trust in the financial markets is at an all-time low. The financial markets are at a turning point. Technology, market structure and new products have evolved more quickly than the regulation. Where and when it will all end, time will tell.


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nipper
post Posted: Jul 30 2012, 01:31 PM
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Study: High-Speed Trading Hurts Long-Term Investors

http://online.wsj.com/article/SB1000087239...3192136866.html

QUOTE
Some of the most heavily traded U.S. stocks might also be among the most expensive to trade, costing investors as much as $2.5 billion a year, according to a New York trading and research firm. Stocks such as Bank of America, Microsoft, Cisco and Ford are so popular with high-frequency trading firms that long-term investors often have trouble quickly buying and selling the stocks, according to a report by Pragma Securities LLC.

Investors trying to trade cost-effectively often find themselves standing in line behind the fleet-footed traders and are forced to wait to execute their trades, which in turn can cause poorer results, the report says. The upshot: Investors are often paying more for many blue-chip stocks than they would have otherwise.

The results contradict a number of industry and academic studies that claim high-speed trading has cut costs for investors.

"In contrast to the academic consensus view that high-frequency trading is benign, our research shows that there's a significant cost to the liquidity that they're providing," said Pragma Chief Executive David Mechner. Pragma, a research and trading firm, estimates the total cost could be $2.5 billion a year.

The report, which was reviewed by The Wall Street Journal and is set for release early Friday, highlights concerns about rising trading costs for investors in today's complex, computer-driven markets. In May, Woodbine Associates Inc., a Stamford, Conn., research firm, issued a report that showed that brokers are losing billions a year due to poor routing decisions. There are more than 50 trading venues in the U.S. stock market, and navigating the terrain is getting increasingly difficult and, at times, costly, traders say.

The Pragma report also raises new questions about impact high-frequency trading, which has become a powerful and controversial force in stock trading in recent years, accounting for more than half of all volume. Backers of the practice, in which firms use powerful computers to move in and out of stocks at high speeds, argue that it reduces trading costs by making it easier for investors to buy and sell.

The Securities and Exchange Commission is probing ties between some high-frequency firms and stocks exchanges, with an eye on whether some order types the exchanges provide give the trading firms an edge over other investors, among other things.

Order types are the commands that give traders the ability to customize their buy and sell orders, for instance setting a specific price at which the trader will buy or sell a stock. They can also help the rapid-fire traders efficiently manage their placement in the trading "queue," the line of orders at exchanges waiting to be executed.

Rapid-fire firms gravitate to heavily traded stocks because they give them more opportunities to turn a profit. Since many high-frequency firms make money by scraping fractions of a cent per share traded, the more shares they trade, the more money they can earn.

The Pragma report shows that the frenzied competition among high-frequency firms to trade in high-volume stocks is at times having a negative effect on regular investors. High-frequency firms are shooting so many buy and sell orders for such stocks into the market they are crowding out other investors, according to the report.

Pragma measured the effect by comparing the volume in certain stocks with the time it takes to execute an order. Longer execution times typically result in poorer results, since a stock's price can swerve away from where it was when the order entered the market. Such an effect is known in the industry as a "shortfall."

The report shows that costs go down initially as trading volumes rise for stocks. Stocks with an average daily volume of about 100,000 shares have an execution shortfall of about one or two cents per share traded. Buy and sell orders for such stocks, typically 100 to 200 shares at a time, take an average of about four minutes to execute and result in shortfalls of one or two cents a share, according to the Pragma study.

As trading volume rises to three million shares, the shortfall drops to less than one cent per share, and execution time for an order of 100 or 200 shares drops to less than a minute.

But as average volume continues to rise, so do the costs and time to execute, the report shows. For stocks with an average daily volume of about 30 million shares—which includes many blue-chip stocks—the shortfall is about two cents a share. Execution time rises to about 2½ minutes. Orders for such stocks by institutions can run from hundreds of thousands to millions of shares at a time.

The Pragma report, to be sure, doesn't capture all aspects of trading. The flood of quotes for heavily traded stocks can help firms that want to trade quickly during volatile markets, notes Andrew Lo, a finance professor at the Massachusetts Institute of Technology. "If the market is tanking, having those high-frequency traders there can be a benefit," he said.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

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wolverine
post Posted: Jun 18 2012, 12:36 PM
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In Reply To: arty's post @ Jun 18 2012, 12:24 PM

I am sub-sub-sub-normal so identifying sub-sub-sub-subwaves is my preferred technique.

I lose money constantly but at least I can identify why I am going so wrong.



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TOO MANY CHIEFS

NOT ENOUGH INDIANS

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arty
post Posted: Jun 18 2012, 12:24 PM
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In Reply To: NightStalker's post @ Jun 18 2012, 11:59 AM

QUOTE
the prevailing trend depends on the timescale you're looking at

Can you give us an example of any time when this has been different?
Ask any Elliot waver and look at their charts: share prices move up for a few ticks, down for a few more, up again ...
If it was any different, how could EW drill down and establish waves and subwaves and sub-subwaves to the n-th degree?

The only additional element that has entered into the game now is still more refinement.
While a guy like Darvas could operate on daily and weekly charts, the advent of PCs allowed us - starting about 12 years ago - to identify shorter swings (hourly "trends" or "sub-subwaves"); since PCs became faster and data delivery is now measured in micro-seconds, we can identify even tick-trends or sub-sub-sub-subwaves.

However: that doesn't invalidate any longer-term analysis nor eliminate the existence of daily/ weekly/ monthly trends.
If one is smart enough - as Mistagear quite evidently is - one can identify and trade small swings up AND down and trade them profitably just like the HFT robots do. As has been argued often enough, flexibility and an open mind are the key.



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I trade daily, but I am not a licensed adviser. Whether you find my ideas reasonable or not: The only person responsible for your actions is YOU.
I follow two rules: (1) There are no sacred truths. All assumptions must be critically examined. Arguments from authority are worthless. (2) Whatever is inconsistent with observed facts must be discarded or revised. We must understand the Market as it is and not confuse how it is with how we wish it to be. (inspired by Carl Sagan)
 
flower
post Posted: Jun 18 2012, 12:09 PM
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In Reply To: NightStalker's post @ Jun 18 2012, 11:59 AM

QUOTE
think perhaps that what Flower was getting at was that the prevailing trend depends on the timescale you're looking at.



Precisely, personally had it with the T/A angle, too much barrow pushing whilst making out the rest of us haven't a clue just because we didn't do advanced maths and computer science or what ever at Uni, if being dominated by a black box connected to outer space is all they see in the stockmarket ---then thank God I have known saner times devilsmiley.gif



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NightStalker
post Posted: Jun 18 2012, 11:59 AM
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In Reply To: mistagear's post @ Jun 18 2012, 11:29 AM

EDIT: I posted the below at the same time as Flower was posting his post below this one:

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I think perhaps that what Flower was getting at was that the prevailing trend depends on the timescale you're looking at.

So, for intraday, or very short term traders, a stock may well be in an uptrend, and that can be traded. Whereas over a longer period, the prevailing trend may be down, etc.

My point, though, is that the switches from short-term uptrends to short-term downtrends - i.e. The oscillations - seem to be much more sudden and much more pronounced than they used to be. And that is down to the computerized trading, I'm sure.

WOW, just as one example, is in a prevailing uptrend that has lasted for over 6 months now. But the prevailing trend if one zooms out to show the last few years, is sideways -i.e. NO trend. It is at the same level now as it was in 2007. What used to be called a Stage 3 Top by Weinstein, in fact. Now, according to Weinstein, the PROBABILITY (not a certainty) is that WOW should head downwards sometime soon, in a Stage 4 downtrend. But the chance of that happening - the chance of it conforming to Weinstein's principles - would NOT be one that I'd bet on. Especially given the 6 month uptrend....

Look at the WOW chart zoomed all the way out, to the max. Classical Stages 1, 2 and 3 Weinstein patterns. But zoom in to the last 6 or 7 months - uptrend.

Would you bet on a likely Stage 4 downtrend any time soon? Would you let FA factors come into it? Would you take into consideration the potential problems with the Masters hardware foray? Or the fact that people will still buy food - probably? Or would you go on pure TA, which would suggest that the Stage 4 decline should occur sometime not too far away? Or would you hold your fire until the downtrend is confirmed by a breach of support, with lower highs and lower lows?

My feelings are that I would not place any meaning on the TA now, as the algos and HFT traders will take WOW wherever the hell they like. It could simply go up and down, a few days or weeks at a time, for decades to come.



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Regards, NightStalker

Algorithmic trading, and HFT are rendering Technical Analysis null and void.
 
flower
post Posted: Jun 18 2012, 11:57 AM
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In Reply To: mistagear's post @ Jun 18 2012, 11:29 AM

QUOTE
At a guess, I'll wager that 90% of SS members are trading against the prevailing trend



Was your original fairly arrogant statement, I asked you to tell me what was a prevailing trend to which you answered again imo arrogantly:
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After decades of looking at stocks, do you still need someone else to tell you if a stock/index is rising or falling ?????

Sorry, but you will have to ask someone else, I have given up wasting time trying to help people who dont really want it.

I simply asked you what was the prevailing trend--nothing more nothing less, since you made the statement that 90% of us may be trading against the trend, I do happen to know in any stock I follow, but do you?

eg: NST intraday is DOWN

..............Daily is DOWN

..............Weekly is UP

..............Monthly is Flat
Attached File(s)
Attached File  NST_intrady_monday.gif ( 8.47K ) Number of downloads: 17
Attached File  NST_daily_down_monday.gif ( 8.09K ) Number of downloads: 18
Attached File  NST_weekly_up_monday.gif ( 8.85K ) Number of downloads: 17
Attached File  NST_mointhly_nowhere_monday.gif ( 6.83K ) Number of downloads: 19

 




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