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This review is from: Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio (Hardcover)
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When it came time for FDR to appoint the first chairman of the Securities and Exchange Commission, he selected Joseph P. Kennedy, a well-known stock market operator and speculator, presumably on the theory "it takes one to know one." Well, it was a good choice, and the SEC got off to a good start, its reputation and effectiveness not only lasting, but increasing for several decades. Unfortunately, in the last 10 years or so, this has not been the case, as theoretical economists and attorneys have led the regulator far afield from protecting investors, the original intent of the '33 and '34 Acts.
As a result many new rules have been instituted changing the investment climate, and this treatise indicts many of them, especially what has become known as high frequency trading ("HFT"), a method that allows "front running," something that was always illegal. The authors, two well-known institutional traders, have been conducting a long-standing effort to do something about the practice for several years. Their contention, of course, is that HFT is destroying investor confidence and portfolios, in general, by allowing these practioners to scalp trades with advance order knowledge and steal (often literally) pennies which mount up to millions of dollars.
It should be noted that conflicts of interest have always been present on Wall Street: Was the broker who sold you that stock acting in your or his best interest? But generally, the markets worked, companies were able to raise money, the public could amass stocks for savings and retirement. At present, however, the authors contend that this is not the case, especially when the very institutions (the SEC, NYSE, NASDAQ and other regulators) are more interested in profits and speed and volume than in the orderly markets of the past.
Read it and weep.
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Initial post: Oct 1, 2012 3:34:48 AM PDT
What is puzzling me as someone who has devoted years to making a profit by daytrading(and barely succeeding) is, why is it so hard for the little guy who buys and sells 1000 to 3000 shares at a time of high volume stocks to even break even. Even when price has just broken thru an 8 simple moving average on a small 2 or or 5 min. time frame, and the larger time frames all point in the same direction. That alone should produce a profit if you are swimming in the direction of the larger trends. But it doesnt work anymore. Why?
Posted on Dec 12, 2012 12:20:52 PM PST
Gary in PA says:
For those of you who can't seem to realize the the main reason why former profitable strategies have stopped working it's real simple. Volume on the markets. It take increased money coming off the sidelines to move prices higher: that is not happening anymore. Now the practice is to push prices up really fast, as the public chases the stock, because the machines are faster the humans, the liquidate into them. Now that you have a position, albeit much higher then you wanted. You have now become the target, as they reverse the price as quickly as it rose. Watch how quickly prices move @ 9:30 and stall and fade for the rest of they day. The quick and the dead. Now try this, hold stocks overnight and sell into rally or even fade the break out. The risk is actually low. It is really hard for prices to move up before the got ya trade shows its ugly head.
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