High Frequency Trading Firms provide liquidity to the public stock exchanges and have been around for more than 20 years. HFTs are called "maker/takers" as the make liquidity by selling shares of stock when there is a high number of buyers but fewer sellers. They take the market and sell short to provide the buy to cover to fill the orders during a panic selling by retail groups and smaller funds managers. HFTs are here to stay and are a necessary market participant in the millisecond transaction professional side of the market. HFTs have 6 primary strategies that create extremely complex algorithms for each of these strategies. HFT programmers and Quants who design these algos are constantly tweaking and improving the algo to trigger precisely as needed.
This creates a highly liquid market open but the rest of the day the stock may have much lower liquidity. Volume Bars indicate high or low liquidity intraday. HFTs Artificial Intelligence is still very new and the AI makes many mistakes. Last earnings season there were stocks that gapped down on GOOD earnings news. This is likely to occur again as AI with HFT algos is still being developed.
HFTs also search for anomalies in order flow which is when a group of retail traders get together and all try to trade the same stock at the same time to create huge momentum intraday. This usually happens around the 3 hour lunch time of the US so between 11- 1pm. HFTs can see these cluster orders and can fill the ques in opposition to the groups intent.
This is just one example of how you may be accidentally trading against an HFT and the HFT is going to win. It has far more money to trade than you do. So be aware of this. You want to be with the HFTs not trading in opposition.
This creates a highly liquid market open but the rest of the day the stock may have much lower liquidity. Volume Bars indicate high or low liquidity intraday. HFTs Artificial Intelligence is still very new and the AI makes many mistakes. Last earnings season there were stocks that gapped down on GOOD earnings news. This is likely to occur again as AI with HFT algos is still being developed.
HFTs also search for anomalies in order flow which is when a group of retail traders get together and all try to trade the same stock at the same time to create huge momentum intraday. This usually happens around the 3 hour lunch time of the US so between 11- 1pm. HFTs can see these cluster orders and can fill the ques in opposition to the groups intent.
This is just one example of how you may be accidentally trading against an HFT and the HFT is going to win. It has far more money to trade than you do. So be aware of this. You want to be with the HFTs not trading in opposition.
Martha Stokes, CMT
ttrader.im/learn-tv
Learn how to use the technical patterns of each market participant for better trade planning.
ttrader.im/learn-tv
Learn how to use the technical patterns of each market participant for better trade planning.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Martha Stokes, CMT
ttrader.im/learn-tv
Learn how to use the technical patterns of each market participant for better trade planning.
ttrader.im/learn-tv
Learn how to use the technical patterns of each market participant for better trade planning.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.