Investors: The Machines Have Taken Over

Investors: The Machines Have Taken Over

Published on 14/06/2013

When you buy or sell an investment or security, the odds are extremely high the other side of the trade is being placed by a high frequency trading [HFT] algorithm – one that cares nothing for the fundamentals of the underlying instrument. It simply is looking to make a quick profit, oftentimes measured in fractions of pennies.

HFT algos can see and react to prices faster than you can. Ridiculously faster. A second on the clock, to an HFT algo, is an eternity.

Economic theory is all about the efficient market hypothesis which says that all traders have – that all information, is basically equal to all players. Today, it has nothing to do with what the fundamental information is. It’s the speed at which you gain access to that information. There is no longer symmetry in that equation.

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