The new flashboys This book has captured the imagination of everyone who invests or trades in the stock market. The fear that the market is “rigged” is everywhere. The IEX CEO, of course, hopes that his new exchange will benefit from all the hype and panic in the media.
However, most investors and retail traders need not worry. If your investments for your long-term portfolio are with a large or giant mutual fund or pension fund, then these funds are using Dark Pools that are outside of the exchange transaction that HFTs cannot see and execute.
If you are a retail merchant, please remember that most orders placed with online brokers for retail merchants are filled from that online broker’s inventory. So your orders never make it to the exchanges. If you are using an ECN electronic communication network, most of those orders are also not sent to exchanges.
Are here 5 Tips to Avoid Front Running HFTs:
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Study your stock charts using large lot volume accumulation/distribution indicators. These are up/down based indicators that track the largest lot, which means 50,000 – 500,000 shares, versus the smallest lots, which are typically 100 shares up to 5,000 shares. Going in with the giant buy keeps you out of the HFT order flow, because Dark Pool orders are hidden from HFTs.
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Remember that any order of 10,000 shares or more is considered a “big lot” order and these tend to be submitted more frequently to exchanges if your online broker’s inventories are too low.
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If you are a day trader, you must accept that HFT activity will interfere with your trading. There is simply no way around it intraday. HFTs are traded between 1000 and 3000 times per second, YOU can only trade on the minute scale by law and by circumstance. Most retail traders could not afford a million dollar HFT trading hardware and software setup.
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Do not use “On Market Orders”. An At Market order tells your broker to fill the order at the market price. This can create a slippage opportunity and wider spreads that will give you a higher cost entry. Also, At Market Orders sends a message to the online broker and the market in general that you are not an educated and experienced investor or trader. At Market Orders are rarely used by experts and professionals. There are only weird specific purposes for such orders.
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Do not use a simple “Limit Order.” Limit orders are the most common reason why retail traders, especially day and swing traders, have constant losses. Pros stopped using limit orders years ago and switched to more complex and multi-level controlled bracketed orders. You should learn these new order types if you plan to swing or day trade so you can avoid being pulled into an HFT downdraft or huge gap.
Big HFT activity is usually a one day event on a stock based on news, arbitrage from another market or instrument, hedging, retail group orders caused by retail traders using the same trading systems, strategies, MACD or stochastic indicators and some technical set. ups. One of the great advantages that you as a retail trader use technical analysis and stock charts is that you can see the activity of HFT, Dark Pool, Smaller Fund, Corporate Buybacks and many more patterns that tell you who controls the price and therefore how. the price will behave thereafter.
One last piece of advice is that HFTs rarely change trend, so you should not start shorting right after a big bearish HFT day.
