Take Advantage of the Trading Machines
Computerized trading is the dominant force in the market today. More than half of daily trading volume is driven by computers. What is the difference between high frequency trading (HFT) and algorithmic trading? How does it affect investors and how can traders overcome the effects that machine based trading has on the market? Here are my thoughts.
First, let’s differentiate between HFT and algorithmic trading. High frequency trading uses advantages in speed to profit. Extremely fast computers coupled with extremely fast connections between markets allows the HFT computer to take very small profits in fractions of a second. It is a game that individual investors cannot play because the resources required make the barrier to entry very high.