High-frequency trading: speed matters

Heidi Moore Dec 23, 2011

High-frequency trading (HFT) is when sophisticated computerized algorithms buy and sell stocks at speeds as fast as a nanosecond, hundreds of thousands of times a day.

Sal Arnuk is co-founder of Themis Trading. Every day, he and his guys trade millions of shares for pension funds, mutual funds and other firms that manage your money. For Sal, high-frequency traders are his worst enemy — a faceless computer who can beat him to every trade.

Sal says these HFTs are responsible for about 70 percent of the volume on any given day of trading. Competing in the market with HFTs is nothing short of a cage match, and it requires quite a bit of bobbing, weaving, dodging and making sure we aren’t feeding the engine of these robots all day long. Sal’s weary that the impact of HFT is only growing, and he blames it for the historic levels of volatility in the markets these days. One day the market is down 200 points, the next it’s up 250. It’s enough to give the average investor whiplash.

According to Sal, the game is just more and more rigged. Rigged enough that the individual invester should get out? He wouldn’t go that far yet. Playing the market is vastly different than it was 10 years ago, and Sal thinks smaller investors just have to up their game and get more knowledgeable about how stocks are trading these days.

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