Quote from ElectricSavant:
Let me get this straight....
when I trade a stock...I simply am putting money in the market for the computers to trade each other back and forth...the fastest computer wins no?
I am not the sharpest nail in the shed compared to you folks...but what has this market become? at least the Buy & Holders could wait it out...now nobody that trades retail stands a chance....or do they?
ES
"...but what has this market become?"
It has become Skynet from The Terminator films. The machines have taken over. Sure, "Buy & Holders could wait it out", and retail traders can still make a buck, as long as they're willing to stomach the volatility.
According to the NY Times article on HFT (high frequency trading):
http://hftsecurityrisk.com/2011/01/03/hft-article-in-the-nytimes/
Here's a few paragraphs from the article worth noting:
"Even the savings of many long-term mutual fund investors are swept up in this maelstrom, when fund managers make changes in their holdings. But the exchanges are catering mostly to a different market breed â to high-frequency traders who have turned speed into a new art form.
They use algorithms to zip in and out of markets, often changing orders and strategies within seconds. They make a living by being the first to react to events, dashing past slower investors â a category that includes most investors â to take advantage of mispricing between stocks, for example, or differences in prices quoted across exchanges.
One new strategy is to use powerful computers to speed-read news reports â even Twitter messages â automatically, then to let their machines interpret and trade on them.
By using such techniques, traders may make only the tiniest fraction of a cent on each trade. But multiplied many times a second over an entire day, those fractions add up to real money.
According to Kevin McPartland of the TABB Group, high-frequency traders now account for 56 percent of total stock market trading. A measure of their importance is that rather than charging them commissions, some exchanges now even pay high-frequency traders to bring orders to their machines."
