I watched this 2 years ago. This has changed my trading game for ever. Its important for individuals to understand this, especially if you want to trade.
Listen go get yourself a Wendy's baconator and then proceed to blow out your nearest toilet. Leave the stall door open...but only take ur pants off in stall... Establish ur dominance in that Wendy's restroom, shit in the sink. GODDAMN
It’s worth noting, spoofing (as mentioned at 5:20) is absolutely illegal. The SEC does not mess around and if you are caught doing this the punishment is severe. As a general rule of thumb, the law states it’s illegal to send any orders to the markets which you do not intend/want to have executed by another trader. Edit: quote stuffing is also generally illegal, although harder to prove and therefore regulate.
You think they care? There fine is nothing compared to the money they make. Plus the SEC is part of it. You need to do you research. Yes it's illegal but happens on a daily basis on the market.
@@Lululal1234 The SEC is a part of it? Like they are participating themselves in illegal trading practices? I'm willing to the believe that if you can provide me with a credible source, but I simply don't think that is happening.
@@oneeif all your orders (considering your an institutional investor buying a large block) hit each seperate exchange at the same time the HFTs can’t front run u and move their spreads away from your desired price
You are absolutely right I keep loosing in real trade but win in Demo. Should I give up on Trade? What should I do? How may I do better? What I'm I doing incorrectly?
This is pure Kabala/Mammon and it has nothing to do whatsoever with the real world. An artificial/speculative, immoral, illegal, unfair, exploitation of the weakest practice. Creating money out of nothing only creates voids of economical, social, psychological nature which leads ultimately to a soulless humankind P.S. the content is extremely well done and simply presented. Occam’s razor in practice. Thank you!
A well explained video ,Trading stock/forex should be transparent I'll rather leverage on service offered by recommend expert in trading, I invest and earn with a financial advisor who assist me in the right form and help me in achieveing my goals.
Good to see someone out here earning with Mr Romero ....I have been his students for about 7weeks now and accumulated a total of $27000 I only started with $5000 despite the dip.
@@jameskaye9729 You should take a class in digital communications, because these are algorithms that operate faster than any other computer, the HFT machines are untouchable. Nothing can move faster than light and light speed over short distances cannot be interfered with by any outside mechanism. Therefore the algorithms themselves need to be subjected to regulation.
@Beatrice R. Damiano There is no magic in trading. The main secret of trading is to have a very strong and reliable signal, but that's not for novices, that's why I work with Larry Kent Nick. His trading strategies are superb
What a coincidence!! It seems that you recently started trading with Mr. Kent. He has been the secret behind my trading success and his experience gives him an edge over other expert traders. I appreciate his services
You know what - I am not a HFT trader and it really does not bother my success rate. I use old fashion methods ,but use technology to make make my old fashion methods work more efficiently and faster. It makes it easier to process price and volume information which provides the elements to make a trading decision quicker. I love the volatility and the low costs that creates profit opportunity if HFT is behind it well good. I have been a 30 year veteran stuffing, spoofing etc. have been around for a long time even before computers where invented.I guess the difference today is that computers do a better job at it as compared to the snail's pace moves that humans are capable of. My point is that people have to learn how to adapt to the reality of the times. HFT contrary to what the institutional funds and retail clients complain about if a stock or commodity is in a trend due to basic fundamental reasons the market will eventually take prices to a level dictated by fundamentals and not due to HFT. Maybe HFT makes the move harder to catch ,but in the end fundamentals will prevail and no amount of HFT will change that. Likewise, if you are an investor who buys and sells stocks infrequently maybe 1 to 2 times a year HFT will not change your ability to buy and sell at a fair price. So if you are an active trader and not an investor instead of blaming HFT and any thing else that makes life harder learn to survive and develop the skills that are needed to conquer. If you can't handle it then get a 8 to 5 job and be happy. Traders who create daily cash flow and eat what they kill need liquidity and volatility. I know I am ranting ,but I have heard enough BS on the evils of HFT and granted that many of the points raised are true,but debatable. Life is not fair so as they say if Life gives you Lemons make Lemonade!!
Ok even if we go with the "its everyone elses fault" story, you still haven't addressed the points in the video like flash crashes which are pretty much out of anyones control and things like spoofing which I would consider malicious stock manipulation. You're right that people can still make money, no one is arguing against that. What people are arguing is that HFT has adverse consequences for the stock market as a whole. And that whole "life isn't fair" thing is such a stupid thing to say. Of course life isn't fair that doesn't mean we should just give up on trying to make it fair and become better than what we are today.
Many comments are question on a financial transaction tax (FTT) and why it is not implemented yet. So I want to try to answer that for everyone, instead of replying to each comment. First of all, it is very important to clarify who actually has to pay the tax and on what transactions and securities it applies. Another interesting question might be how high a transaction tax should be. I have no definite answer for this, but I can give an example: In 2012 a transaction tax was implemented in France, only for stocks, and market makers (in other words High frequency traders or HFT`s) were tax exempt. The tax was 20 basis points on every transaction, this equals 0.2%. Now let`s assume everyone has to pay the tax and it applies on every security (including bonds, futures, any derivative and stocks, commodities and stocks): institutions, high frequency traders, and "normal people" alike. This has several implications. First of all, the state would generate a decent amount of extra money as tax income. Some also argue, that this punishes "noise" or useless trading that does not help price discovery. This is also referred to as uninformed trading, as opposed to informed trading which benefits price discovery. By reducing noise trading, the volatility in the market should go down, which implies less uncertainty and less risk. Besides, such a tax should punish "short- terminism". This implies mostly to stocks. Since trading often is punished, it is expected that the shareholder composition of componies changes to shareholders to hold a share for long time periods. It is also expected, that such shareholders are interested in a more sustainable business instead of quick profits, thus enhancing corporate governance. Others argue, that the introduction of a such a tax, decreases liquidity in the market since it increases the Bid- Ask Spread. The Bid- Ask spread is the difference between the current best buy and sell price. In other words, the higher the Bid- Ask spread, the higher the trading costs. In an extreme scenary where the bid- ask spread is incredibely large, no market participant is willing to cross it anymore and no trades are made at all. Our case is a weaker form of this extreme case. Still some are willing to trade, but not as many as before, since the trades are less profitable. This lowers liquidity and increases volatility, which impairs market quality and price discovery. There are some further reasons for this, concerning the depth of the limit order book and liquidty providers, but that really takes it too far, It might also lead to less or slower consumption of arbitrage opportunites. The combination of both effects decreases market efficiency. This is it :D that is basically the debate, and since there is no consensus yet, transaction taxes are not implemented yet, at least not for longer time periods. As a little bonus, a very specific negative externality: All Banks have an optimal, individual risk structure that each bank always tries to hold. In simple words, it is the optimal risk reward trade- off for them (this goes beyond simple profitabilty, it also includes further damage to society etc.). Thus, the entire financial sector has a so- called risk equilibrium. Whenever a Bank enters a new position, for example buys bonds from a fund, the bank deviates from its optimal risk structure. Thus,the bank either sells the bonds again, or it hedges its position. Either way, the bank trades most likely with another bank. Now the other bank deviates from its optimal risk structure. In short, one transactions triggers many transactions- also referred to as a ripple effect- and it takes many many transactions until the risk equilibrium is found again. Now consider the introduction of a FTT. This impairs the banks ability to trade, as they might be unable to find a trading partner, or it might be unprofitable. Also, the FTT reduces liquidity in general. The combination of both effects leads to less optimal risk distribution within the financial sector, thus destabilizing the system and increasing the risk of a systematic crisis. I hope this was helpful. Maybe it helps some to understand why policy debates are not just black and white and not everything that seems "fair" at first glance is actually a good idea.
FTT was tried in Sweden, it destroyed their stock market as the equities simply moved away to other exchanges. The amount of money it generated was also negligible. If FTT comes along, much of the trading will be done in derivatives off-exchanges, bypassing the FTT (just like UK and CFDs).
1)if you know which price to buy and on which price to sell if the majority uses this method than high frequency traders won't be able to play their tricks on anyone 2)every stock exchange must make the refresh rate of each stock to be changed for every 500 millisecond -1 second not less than that so that everyone gets access the same order book prices
Nishant Gogna I don’t think it’s impossible because HFTs only profit off their speed, I think it’s closed minded to think you can only make money with “one” type of algorithmic approach
Quote stuffing, spoofing, option buying... Nothing changes. I park my money in a stock for the long term play based on many variables. It's time in the market, not timing the market. It's money I don't need access to, don't need and forget about for 25 years.
Very educational. Are there videos that describe the FTD (Failure To Deliver) problems in the market? As well as, which is the larger problem and risk, the High Frequency Trading or the majority of trades that take place OUTSIDE of the country's Stock Exchanges?
This is why there are so many online trading courses and apps nowadays. It's a market in which money doesn't come from work, but from speculation, so you need a consistent foundation of unprepared but confident traders to throw you their money without almost realising. Those adds are dangerous scams
I don't agree with the liquidity part since market makers are hfts and can only do their job if they have fast execution. They also are obligated to offer both sides. There is also strict regulation around manipulation such as spoofing and quote stuffing which makes them happen highly infrequently. There is definitely a discussion to have however on if current regulation is enough
i saw an exchange that used a kilometers long cable so that whenever a request is sent no matter how closed it is to the exchange it will need to wait a few seconds
Great video. This goes to show HFT-A machines have a clear edge. Spoofing ... unregulated. Wow. No wonder 95% of traders lose! How many times when you buy or short something and it automatically goes to the opposite side.
Does this video explain why, during my sojourns into the world of day trading, I would have done MUCH better if my tactic had been to always do the opposite of what seemed logical? I remember I couldn't help concluding that some kind of foul-play was in operation.
Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Instead of trying to predict and prognosticate the stability of the market and precisely when the change is going to happen, a better strategy is simply having a portfolio that’s well prepared for any eventually, that’s how some folks' been averaging 150K every 7week these past
A lot of folks downplay the role of advisors until being burnt by their own emotions. I remember couple summers back, after my lengthy divorce, I needed a good boost to help my business stay afloat, hence I researched for licensed advisors and came across someone of utmost qualifications. She's helped grow my reserve notwithstanding inflation, from $275k to $850k.
@@AlbertiniCaputi I'm been guided by “Elizabeth Colleen Nurre’’ who is widely recognized for her competence and expertise in the financial market. She has a thorough understanding of portfolio diversification and is regarded as an authority in this field.
I just googled her and I'm really impressed with her credentials; I reached out to her since I need all the assistance I can get. I just scheduled a caII.
6:23 - all today's markets have curcuit breakersand price collars. In some imaginary market yes - the price can fall down to zero, but in reality the trading is just stopped as soon as the price drops or rises below/above the limits.
Hi! I'm Simone and I really appreciated this video, it is super clear and it gave me inspiration to decide what to deal with in my master degree thesis! Could I get in touch with you to know more about where you got the information, which sources did you consult? It would help me a lot in defining some literature on the subject to go deeper into it!
I found this: www2.weed-online.org/uploads/hft_transcript_sources_links_englisch.pdf Is there maybe any other literature references that you might suggest? :) Thanks!
Today at 9.29 with 57 seconds. The stock for JMAI was at 49.76 and for 1 second went down to 43. Of course clearing all the stop loss orders people put and buy oil ng the for 43 dollars while worth 49. In less than a second. How do you compete or prepare for that type of cheating
High frequency trading is irrelevant if the platform itself is selling and giving away what youre looking at and what you have an order open for, and then selling shares at a higher price every time you buy, especially as a market order. If commission fees arent needed anymore, they're making money other ways i assume.
you hinted at it. . . but let's not forget brokers' incentive to keep volume high. You say 'traders' with access to HFT technologies incur benefits here. . and they do of course . . but many of these are large brokers and marker makers . . like Citi. so HFT traders get their market advantage. and brokers benefit from the additional (or "new normal") amount volume. so. . . a lot of market participants don't want to see any regulatory change that would level the playing field for ordinary traders
market makers can't publish quotes above/below their received buy/sell orders. liquidity in the context you propose is neutral. HFT's will cause more volatility when they cease but while they are active their added liquidity is neutral
+TokyoTransit They make it rise themselves. Removing the puts and increasing the volume of calls. Nobody can challenge the move as they have a market share of more than 50%. By the time any retailer has spotted the move higher, it's already over, and HFTs are taking the profits.
+Jim Boba do you mean ALL HFT traders are moving the market in one direction in coordinated fashion? How do they agree in which direction they need to move the market? They send SMSes to each other? What happens if one HFT trader needs the market to move up and the other - to move down?
What I see here is some machines doing nothing but draining money from the stock market. Why do they need to exist? That money didn't just spawn in, it belongs to people doing actual stuff. Yes, of course liquidity is a good thing, but in my opinion this is one of the few things that shouldn't be a part of the business sector. As a programmer if life was my game project I'd just patch them out and use some sort of open-source software to optimize demand and supply and directly connect the seller, the buyer, and maybe some delivery service if they need it. Of course they wouldn't agree because everyone involved is making good money, but how about we create the software and try it in small scale, and if it works, use it everywhere?
*_You don't need to set up a complicated and time-consuming trading system any more. This system is so good that thousands of traders are reporting their profits in real time. A new trading sensation? I think this one is "for real", Here's Why >>> _**_t.co/LVD8a7AK5f_**_ ._*
What is "actual stuff"? How is a mutual fund doing "actual stuff"? Trading is about finding mispriced assets, just like investing. It's all "actual stuff". Only problem with HFT is that the information they receive is not available to other market participants, it's closer to insider trading.
obviously no stop loss at all either? gutsy man... #1 rule of trading by the way. yet, when bots argue or bug out, a flash crash happens and a lot of people lose money. no just intraday traders... swing traders that plan on holding for days, weeks or months too. you should always care about corruption.
I have some understanding issues. For example at 2:30: what exactly is the benefit of being nearer to the stock market. Of course your orders are done faster and you have more of an predicted movement of the market. But for that you still need a mathematically model that won't be true 100%. And the other participants aren't damaged by it. And I don't understand the animation in the background. I mean, its nit like you now that the price will rise in the next second x points and the stock will raise continuous. And how does quote stuffing work? If I as a human want to buy the SAP I just send a buy order to the stock exchange. What is this unimportant information that got send by HFTs and why wont they influence themself?
1st question: They get served first so, they can buy and sell faster. Of course they are not right 100% but do don't have to be 100% correct. You just have to be correct most of the time and end result with millions of transaction will result in profit. 2nd question: This unimportant offers are the offers that don't yield anything. Since, computers analyze the stocks, they will get stuck in analyzing this offers and hence respond to better offers slower because they have more stuff to analyze but the computer which is putting up these offers will know that these offers are put up by it and hence won't get influenced by it and respond to better offers.
4:12 - every classic trader pays for time of the trasaction - HFT's are making the market allowing to execute orders immediately. If noone makes the market teh classic tarder will sit with his order for hours waiting for the counterparty. HFT's a taking risk by transacting with first counterparty and bear the asset till the second counterparty arrives to the market
+TokyoTransit High frequency traders SHOULD take risk. That's what investing is - taking risk to seek a profit. On the other hand, in general, HFTs are in a physical, legal, and intellectual position to make MASSIVE profit while taking virtually zero risk. That is a fundamental flaw. In the long run, this flaw hurts society, and eventually will hurt high frequency traders if they massacre the market. This could happen if they create so much risk for everyone else that masses of investors pull their money out of the market. Then, as the video says, the economy could be damaged.
+Al Mora EVERYBODY who is trading is taking the risk. There is no trading without taking the risk. HFTs are not making MASSIVE profits. That;s misconception. And they have enormous risks. Zero risk is a lie. Thats if fundamental truth. There is no free money on the market.
+TokyoTransit Wow. Are you an HFT? Or are you related to one? Like the video, I'm NOT against high frequency trading. (1) I'm against ANY trading that is hidden. As the video says, HFTs are stepping between buyers and sellers who don't know the HFT is involved. That is front-running defined. Doesn't that sound unethical to you? If it doesn't, I'm sorry, I don't understand your logic or value system. (2) I'm against ANYONE having a speed advantage over anyone else. As the video says, HFTs pay electronic exchanges to allow them to hook into their system with shorter wires than other parties, which is called "co-location." Co-location gives HFTs a permanent, unbeatable speed advantage. Doesn't that sound unethical to you? (3) I'm against ANYONE posting quotes then not filling them when they're 'hit.' I was an institutional trader at the largest investment bank in the world. I've traded stocks, bonds, currencies, and derivatives in all three of those asset classes. I've traded many, many billions of dollars worth of instruments. In all of my experience trading, NOT ONCE did someone not fill a quote which they gave me. If they had, I would never have traded with them again, because not filling a quite is plain and simple a filthy trick. If you went to a grocery store, and when you walked up to pay, they took most of your groceries off of the belt and said, sorry, you'll have to pay more for these if you want them, would you say that is ethical? (4) I'm against ANYONE quote-stuffing. HFTs do this to bog down the market at certain times. Do you think that is ethical? (5) It is reported that HFTs post false headlines (not discussed in this video) in order to move markets in a certain direction. Please, please tell me you think posting false headlines is unethical.
+Al Mora > HFTs are stepping between buyers and sellers who don't know the HFT is involved. That is front-running defined. - I'm sorry - Mercedess Benz car dealers are stepping between Mercedez factory and car buyers - are they called front runners? > Doesn't that sound unethical to you? If it doesn't, I'm sorry, unethical what? selling when somoen is buying and buying when someone is selling? This is unethical? this is called market making. Business as old Egypt and Mesopotamia > I don't understand your logic or value system. exactly. you misunderstand the business that's why this ideo looks so impressive to you while it is a bag of lies and misconceptions
+Al Mora > (2) I'm against ANYONE having a speed advantage over anyone else. you really are? My fiber optic internet conenction is faster than your modem coneection, Should I cut my cable and sell my Nissan GTR just because you drive VW Beetle?
I will not say HFT's are cheaters but they are actually not investing. stock markets are for mutual benefits of Investors and Companies but here only one party gets benefit.
pretty good video, but has some holes. the way it was explained to me, people always make money off of every single trade, regardless of the actual value of what's being traded, so the money incentive isn't there to stop the high frequency trading. more trades = more profit.
High frequency trading is putting individual investors against AI and we have been losing for years. To much liquidity gets put into the market and the moment the algorithm gets a whiff, they pull out, while people like you and I, cannot react on the same scale. They are stealing billions by crashing the market over and over.
I was in DFEN which is a leveraged Defense ETF. It doesn't have a lot of volume. When I went to take profits I kept seeing the order book change before my order hit. I eventually had to sell low to get out. It's annoying.
I watched this 2 years ago. This has changed my trading game for ever. Its important for individuals to understand this, especially if you want to trade.
How has it changed your trading game? If u don't mind. What do u do different now?
@@sultanu007 he started trading every second....
It's bait for someone to come in with an actual strategy.
@sultanu007 he used new approach: closed all positions and exited
@sultanu007 it's a mindset. To understand you are getting f...k
Came for the weed, stayed for the very well produced presentation.
Keep it up.
lol me too
Me too
You explain it so well. I had a rough understanding of this before, but now it's crystal clear - particularly the flash crashes.
Listen go get yourself a Wendy's baconator and then proceed to blow out your nearest toilet. Leave the stall door open...but only take ur pants off in stall... Establish ur dominance in that Wendy's restroom, shit in the sink. GODDAMN
It’s worth noting, spoofing (as mentioned at 5:20) is absolutely illegal. The SEC does not mess around and if you are caught doing this the punishment is severe. As a general rule of thumb, the law states it’s illegal to send any orders to the markets which you do not intend/want to have executed by another trader.
Edit: quote stuffing is also generally illegal, although harder to prove and therefore regulate.
You think they care? There fine is nothing compared to the money they make.
Plus the SEC is part of it. You need to do you research. Yes it's illegal but happens on a daily basis on the market.
@@Lululal1234 The SEC is a part of it? Like they are participating themselves in illegal trading practices? I'm willing to the believe that if you can provide me with a credible source, but I simply don't think that is happening.
I work for a big market maker. On some exchanges, quote stuffing now leads to getting penalized by the exchange's systems.
Didn't Chase get caught doing this with pending orders not too long ago?
@P0lntL3sS they get caught but pay nothing compared to what they make. They know they are doing naughty 😏 😜 🤫
WEED is doing a very good job explaining this with easy to understand animation! thank you.
Weed is good for you 😂
Saw a video by a guy from RBC on this. The way to counter it is to trade smarter, not faster than your competitors.
If you could be less vague that would be great....
What he means is if your smart you wont trade
@@oneeif all your orders (considering your an institutional investor buying a large block) hit each seperate exchange at the same time the HFTs can’t front run u and move their spreads away from your desired price
This is brilliantly done. Thank you,
Why *Not subtitled?* ?
☹
Nice video you and mr pavil Conrad are really helping my life in trading thanks .
Henrik Raymond nice channel just subscribed .
What are you trading ?
Much love from Florida
Jessica witherford yeah he is from Europe. But he based in Washington USA .
Danny keaton I trade stock / forex The market is now on the good side .
A beautifully illustrated and highly absorbable explanation. Thank you.
yes. adorable. that proposal would not work and it would be horrible for the industry, punishing the small guys just as badly as the big players
*"weed"*
hehe
ikr
SOMEONE HAD TO SAY IT
Lmao
*"High"* Frequency Trading
The HFTs are pure liquidity extractors. What a phenomenal quality since 8 years ago! ❤
I HAVE INCURRED SO MUCH LOSSES TO TRADE ON MY OWN,I TRADE WELL ON DEMO BUT I THINK THE REAL MARKET IS MANIPULATED.
You are absolutely right
I keep loosing in real trade but win in Demo.
Should I give up on Trade?
What should I do?
How may I do better?
What I'm I doing incorrectly?
I always advice new members to have an orientation on how it works before getting involved. Trade offers more benefits than just holding.
Kate Floretta
in stagram
Google "katefxfloretta" anywhere take classes and learn to trade.
having a mentor is also very important when it comes to Trade, with out that, it can be very frustrating.
This is pure Kabala/Mammon and it has nothing to do whatsoever with the real world. An artificial/speculative, immoral, illegal, unfair, exploitation of the weakest practice.
Creating money out of nothing only creates voids of economical, social, psychological nature which leads ultimately to a soulless humankind
P.S. the content is extremely well done and simply presented. Occam’s razor in practice. Thank you!
Great video, I made sure to like and share it. You did well explaining a complex topic including solutions = bravo
A well explained video ,Trading stock/forex should be transparent I'll rather leverage on service offered by recommend expert in trading, I invest and earn with a financial advisor who assist me in the right form and help me in achieveing my goals.
Great content.
I recommend Dr Romero pieto.
@ConsultRomeropieto
That's his telegram handle 👆.
Good to see someone out here earning with Mr Romero ....I have been his students for about 7weeks now and accumulated a total of $27000 I only started with $5000 despite the dip.
The best I've seen high frequency trading explained. I understand now. Thank you!
Isn't the whole quote stuffing/spoofing thing illegal? Sounds like market manipulation to me
It is illegal. Idk why people think it's a hft thing. It's been around forever.
@@JustinIm27 Because HFT does it better
It is illegal. This video is just propaganda
the problem is that canceling an order is a daily task in trading that why its hard to know the intent behind canceling orders
@@jameskaye9729 You should take a class in digital communications, because these are algorithms that operate faster than any other computer, the HFT machines are untouchable. Nothing can move faster than light and light speed over short distances cannot be interfered with by any outside mechanism. Therefore the algorithms themselves need to be subjected to regulation.
Thanks for the excellent video. It blows my mind how smart some people are out there to come up with this kind of stuff.
Excellent and well informed video! Thank you for your effort!
Thanks for the content. I'm already on my way to success. Trade has been the main source of income, although I barely do it myself
@Beatrice R. Damiano There is no magic in trading. The main secret of trading is to have a very strong and reliable signal, but that's not for novices, that's why I work with Larry Kent Nick. His trading strategies are superb
What a coincidence!! It seems that you recently started trading with Mr. Kent. He has been the secret behind my trading success and his experience gives him an edge over other expert traders. I appreciate his services
He is obviously the best. I made a profit of $20,500 trading with him last week. He has made bitcoin trading easier than i think.
@Beatrice R. Damiano Larry Kent Nick Trading ***
Instagram
You know what - I am not a HFT trader and it really does not bother my success rate. I use old fashion methods ,but use technology to make make my old fashion methods work more efficiently and faster. It makes it easier to process price and volume information which provides the elements to make a trading decision quicker. I love the volatility and the low costs that creates profit opportunity if HFT is behind it well good. I have been a 30 year veteran stuffing, spoofing etc. have been around for a long time even before computers where invented.I guess the difference today is that computers do a better job at it as compared to the snail's pace moves that humans are capable of. My point is that people have to learn how to adapt to the reality of the times. HFT contrary to what the institutional funds and retail clients complain about if a stock or commodity is in a trend due to basic fundamental reasons the market will eventually take prices to a level dictated by fundamentals and not due to HFT. Maybe HFT makes the move harder to catch ,but in the end fundamentals will prevail and no amount of HFT will change that. Likewise, if you are an investor who buys and sells stocks infrequently maybe 1 to 2 times a year HFT will not change your ability to buy and sell at a fair price. So if you are an active trader and not an investor instead of blaming HFT and any thing else that makes life harder learn to survive and develop the skills that are needed to conquer. If you can't handle it then get a 8 to 5 job and be happy. Traders who create daily cash flow and eat what they kill need liquidity and volatility. I know I am ranting ,but I have heard enough BS on the evils of HFT and granted that many of the points raised are true,but debatable. Life is not fair so as they say if Life gives you Lemons make Lemonade!!
+1
Get'em
Ok even if we go with the "its everyone elses fault" story, you still haven't addressed the points in the video like flash crashes which are pretty much out of anyones control and things like spoofing which I would consider malicious stock manipulation. You're right that people can still make money, no one is arguing against that. What people are arguing is that HFT has adverse consequences for the stock market as a whole. And that whole "life isn't fair" thing is such a stupid thing to say. Of course life isn't fair that doesn't mean we should just give up on trying to make it fair and become better than what we are today.
Do you know how to make lemonade juice
Many comments are question on a financial transaction tax (FTT) and why it is not implemented yet. So I want to try to answer that for everyone, instead of replying to each comment. First of all, it is very important to clarify who actually has to pay the tax and on what transactions and securities it applies. Another interesting question might be how high a transaction tax should be. I have no definite answer for this, but I can give an example: In 2012 a transaction tax was implemented in France, only for stocks, and market makers (in other words High frequency traders or HFT`s) were tax exempt. The tax was 20 basis points on every transaction, this equals 0.2%.
Now let`s assume everyone has to pay the tax and it applies on every security (including bonds, futures, any derivative and stocks, commodities and stocks): institutions, high frequency traders, and "normal people" alike. This has several implications. First of all, the state would generate a decent amount of extra money as tax income. Some also argue, that this punishes "noise" or useless trading that does not help price discovery. This is also referred to as uninformed trading, as opposed to informed trading which benefits price discovery. By reducing noise trading, the volatility in the market should go down, which implies less uncertainty and less risk. Besides, such a tax should punish "short- terminism". This implies mostly to stocks. Since trading often is punished, it is expected that the shareholder composition of componies changes to shareholders to hold a share for long time periods. It is also expected, that such shareholders are interested in a more sustainable business instead of quick profits, thus enhancing corporate governance.
Others argue, that the introduction of a such a tax, decreases liquidity in the market since it increases the Bid- Ask Spread. The Bid- Ask spread is the difference between the current best buy and sell price. In other words, the higher the Bid- Ask spread, the higher the trading costs. In an extreme scenary where the bid- ask spread is incredibely large, no market participant is willing to cross it anymore and no trades are made at all. Our case is a weaker form of this extreme case. Still some are willing to trade, but not as many as before, since the trades are less profitable. This lowers liquidity and increases volatility, which impairs market quality and price discovery. There are some further reasons for this, concerning the depth of the limit order book and liquidty providers, but that really takes it too far, It might also lead to less or slower consumption of arbitrage opportunites. The combination of both effects decreases market efficiency.
This is it :D that is basically the debate, and since there is no consensus yet, transaction taxes are not implemented yet, at least not for longer time periods. As a little bonus, a very specific negative externality:
All Banks have an optimal, individual risk structure that each bank always tries to hold. In simple words, it is the optimal risk reward trade- off for them (this goes beyond simple profitabilty, it also includes further damage to society etc.). Thus, the entire financial sector has a so- called risk equilibrium.
Whenever a Bank enters a new position, for example buys bonds from a fund, the bank deviates from its optimal risk structure. Thus,the bank either sells the bonds again, or it hedges its position. Either way, the bank trades most likely with another bank. Now the other bank deviates from its optimal risk structure. In short, one transactions triggers many transactions- also referred to as a ripple effect- and it takes many many transactions until the risk equilibrium is found again. Now consider the introduction of a FTT. This impairs the banks ability to trade, as they might be unable to find a trading partner, or it might be unprofitable. Also, the FTT reduces liquidity in general. The combination of both effects leads to less optimal risk distribution within the financial sector, thus destabilizing the system and increasing the risk of a systematic crisis.
I hope this was helpful. Maybe it helps some to understand why policy debates are not just black and white and not everything that seems "fair" at first glance is actually a good idea.
FTT was tried in Sweden, it destroyed their stock market as the equities simply moved away to other exchanges. The amount of money it generated was also negligible. If FTT comes along, much of the trading will be done in derivatives off-exchanges, bypassing the FTT (just like UK and CFDs).
Thank you, Germany! Great video .... awesome!
Very effectively you have explained the complex system in easy way.
Some dank stuff you got there
1)if you know which price to buy and on which price to sell if the majority uses this method than high frequency traders won't be able to play their tricks on anyone
2)every stock exchange must make the refresh rate of each stock to be changed for every 500 millisecond -1 second not less than that so that everyone gets access the same order book prices
Great video. HFTs run the market. The goal is to beat the algorithm, which is impossible. The market is manipulated.
Nishant Gogna I don’t think it’s impossible because HFTs only profit off their speed, I think it’s closed minded to think you can only make money with “one” type of algorithmic approach
No, learn how it works lol
Quote stuffing, spoofing, option buying... Nothing changes.
I park my money in a stock for the long term play based on many variables. It's time in the market, not timing the market. It's money I don't need access to, don't need and forget about for 25 years.
Got my attention at the beginning with WEED
Very educational. Are there videos that describe the FTD (Failure To Deliver) problems in the market? As well as, which is the larger problem and risk, the High Frequency Trading or the majority of trades that take place OUTSIDE of the country's Stock Exchanges?
This is the best 10 min video for a better capitalism.
This is why there are so many online trading courses and apps nowadays. It's a market in which money doesn't come from work, but from speculation, so you need a consistent foundation of unprepared but confident traders to throw you their money without almost realising. Those adds are dangerous scams
I like recommendations at the end. Really excellent
such a high quality production.
yesss.. yesss.. 'Free markets'
Best explanation I've ever seen, please link patreon donations or something at the bottom of your vids boss
I don't agree with the liquidity part since market makers are hfts and can only do their job if they have fast execution. They also are obligated to offer both sides. There is also strict regulation around manipulation such as spoofing and quote stuffing which makes them happen highly infrequently. There is definitely a discussion to have however on if current regulation is enough
Great video, views should be in the tens of millions
This is an awesome video! Well explained :)
5:56 I love how half of all the code here is just rand.Next()
That was SUPER good and clear, thanks!
Thanks for this simplified explanation
HFT is the reason why I don't day trade. They don't really have any effect or at least much less effect when keeping a position for a longer time.
How did they fail to impose half second of holding period?
i saw an exchange that used a kilometers long cable so that whenever a request is sent no matter how closed it is to the exchange it will need to wait a few seconds
Helpful. We are in Kansas! Thanks.
good explanation, that was pretty interesting
Very good explanation of the market.
Once again, I say thank you WEED.
Is there an update for the shown regulations?
Incredibel Video!! Good Job! :)
The odds are always stacked against the little guys.
Bruh, that's not news.
Great video. This goes to show HFT-A machines have a clear edge. Spoofing ... unregulated. Wow. No wonder 95% of traders lose! How many times when you buy or short something and it automatically goes to the opposite side.
Best video I've seen on this topic.
Many thanks for sharing!
Does this video explain why, during my sojourns into the world of day trading, I would have done MUCH better if my tactic had been to always do the opposite of what seemed logical? I remember I couldn't help concluding that some kind of foul-play was in operation.
TranceNotes any examples?
no, that just means you sucked
Excellent video! 👍🏼👍🏼
Building wealth involves developing good habits like regularly putting money away in intervals for solid investments. Instead of trying to predict and prognosticate the stability of the market and precisely when the change is going to happen, a better strategy is simply having a portfolio that’s well prepared for any eventually, that’s how some folks' been averaging 150K every 7week these past
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Greatly explained, thanks mate!
Very well presented
Great job
Excellent visuals!
Why an perfect video like this doesn't have a subtitle?
6:23 - all today's markets have curcuit breakersand price collars. In some imaginary market yes - the price can fall down to zero, but in reality the trading is just stopped as soon as the price drops or rises below/above the limits.
laughs in the WTI Light Sweet Crude Oil Futures price.
nice explanation for some good tricks :) good job
best explanation, thank you!!!
Hi! I'm Simone and I really appreciated this video, it is super clear and it gave me inspiration to decide what to deal with in my master degree thesis!
Could I get in touch with you to know more about where you got the information, which sources did you consult? It would help me a lot in defining some literature on the subject to go deeper into it!
I found this:
www2.weed-online.org/uploads/hft_transcript_sources_links_englisch.pdf
Is there maybe any other literature references that you might suggest? :)
Thanks!
@@Potuit95 hello did you complete your thesis
Great video. In gonna go park up outside the stock exchange with my RobinHood cellphone. 📈😗
Today at 9.29 with 57 seconds. The stock for JMAI was at 49.76 and for 1 second went down to 43. Of course clearing all the stop loss orders people put and buy oil ng the for 43 dollars while worth 49. In less than a second. How do you compete or prepare for that type of cheating
Excellent video
WELL EXPLAINED! Thank you very much!
Very informative stuff
Well explained
Solutions > restrictions
thank you so much
Buy then hold, hold and hold..
High Frequency Traitors
i cant unhear it 🤣🤣🤣
High frequency trading is irrelevant if the platform itself is selling and giving away what youre looking at and what you have an order open for, and then selling shares at a higher price every time you buy, especially as a market order. If commission fees arent needed anymore, they're making money other ways i assume.
I wonder if they're is a link between property prices, even residential housing and how close they are to exchanges.
a positive correlation
you hinted at it. . . but let's not forget brokers' incentive to keep volume high. You say 'traders' with access to HFT technologies incur benefits here. . and they do of course . . but many of these are large brokers and marker makers . . like Citi. so HFT traders get their market advantage. and brokers benefit from the additional (or "new normal") amount volume. so. . . a lot of market participants don't want to see any regulatory change that would level the playing field for ordinary traders
market makers can't publish quotes above/below their received buy/sell orders. liquidity in the context you propose is neutral.
HFT's will cause more volatility when they cease but while they are active their added liquidity is neutral
k
Thank you for really informative video
It's funny when you witness the loops happening and the quotes jumping around in a repeated pattern.
for example 2:31 the buying price rises. HFT trader buys the commodity - but who tell the HFT trader that the price will rise to make the profit?
+TokyoTransit They make it rise themselves. Removing the puts and increasing the volume of calls. Nobody can challenge the move as they have a market share of more than 50%. By the time any retailer has spotted the move higher, it's already over, and HFTs are taking the profits.
+Jim Boba there are no puts and calls - we are talking about stocks, not derivatives
Buys and sells w.e. Just jargon. Point is they move the market in the direction they please.
+Jim Boba do you mean ALL HFT traders are moving the market in one direction in coordinated fashion? How do they agree in which direction they need to move the market? They send SMSes to each other? What happens if one HFT trader needs the market to move up and the other - to move down?
> When large investor say, Goldman Sach invest a huge amount of money,
the problem comes with the very first word of your sentence: "when"
Really good video
Great video
What I see here is some machines doing nothing but draining money from the stock market. Why do they need to exist? That money didn't just spawn in, it belongs to people doing actual stuff. Yes, of course liquidity is a good thing, but in my opinion this is one of the few things that shouldn't be a part of the business sector. As a programmer if life was my game project I'd just patch them out and use some sort of open-source software to optimize demand and supply and directly connect the seller, the buyer, and maybe some delivery service if they need it. Of course they wouldn't agree because everyone involved is making good money, but how about we create the software and try it in small scale, and if it works, use it everywhere?
+Ben Snow You do have to admit this type of software is incredibly complex and pretty cool.
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What is "actual stuff"? How is a mutual fund doing "actual stuff"? Trading is about finding mispriced assets, just like investing. It's all "actual stuff". Only problem with HFT is that the information they receive is not available to other market participants, it's closer to insider trading.
great video! i don't really care though, my average holding period is about 2-3 days
obviously no stop loss at all either? gutsy man... #1 rule of trading by the way. yet, when bots argue or bug out, a flash crash happens and a lot of people lose money. no just intraday traders... swing traders that plan on holding for days, weeks or months too. you should always care about corruption.
Machines know the price of everything and the value of nothing!
great video. thank you
This is the problem with becoming too reliant on computers, either in stock trading or in any other industry.
Not really a problem. Problem is information asymmetry.
I have some understanding issues. For example at 2:30: what exactly is the benefit of being nearer to the stock market. Of course your orders are done faster and you have more of an predicted movement of the market. But for that you still need a mathematically model that won't be true 100%. And the other participants aren't damaged by it. And I don't understand the animation in the background. I mean, its nit like you now that the price will rise in the next second x points and the stock will raise continuous.
And how does quote stuffing work? If I as a human want to buy the SAP I just send a buy order to the stock exchange. What is this unimportant information that got send by HFTs and why wont they influence themself?
1st question:
They get served first so, they can buy and sell faster. Of course they are not right 100% but do don't have to be 100% correct. You just have to be correct most of the time and end result with millions of transaction will result in profit.
2nd question:
This unimportant offers are the offers that don't yield anything. Since, computers analyze the stocks, they will get stuck in analyzing this offers and hence respond to better offers slower because they have more stuff to analyze but the computer which is putting up these offers will know that these offers are put up by it and hence won't get influenced by it and respond to better offers.
Leeengold there's a great book called 'Flash Boys'. You'll get many answers with that book :)
4:12 - every classic trader pays for time of the trasaction - HFT's are making the market allowing to execute orders immediately. If noone makes the market teh classic tarder will sit with his order for hours waiting for the counterparty. HFT's a taking risk by transacting with first counterparty and bear the asset till the second counterparty arrives to the market
+TokyoTransit High frequency traders SHOULD take risk. That's what investing is - taking risk to seek a profit. On the other hand, in general, HFTs are in a physical, legal, and intellectual position to make MASSIVE profit while taking virtually zero risk. That is a fundamental flaw. In the long run, this flaw hurts society, and eventually will hurt high frequency traders if they massacre the market. This could happen if they create so much risk for everyone else that masses of investors pull their money out of the market. Then, as the video says, the economy could be damaged.
+Al Mora EVERYBODY who is trading is taking the risk. There is no trading without taking the risk. HFTs are not making MASSIVE profits. That;s misconception. And they have enormous risks. Zero risk is a lie. Thats if fundamental truth. There is no free money on the market.
+TokyoTransit Wow. Are you an HFT? Or are you related to one? Like the video, I'm NOT against high frequency trading. (1) I'm against ANY trading that is hidden. As the video says, HFTs are stepping between buyers and sellers who don't know the HFT is involved. That is front-running defined. Doesn't that sound unethical to you? If it doesn't, I'm sorry, I don't understand your logic or value system. (2) I'm against ANYONE having a speed advantage over anyone else. As the video says, HFTs pay electronic exchanges to allow them to hook into their system with shorter wires than other parties, which is called "co-location." Co-location gives HFTs a permanent, unbeatable speed advantage. Doesn't that sound unethical to you? (3) I'm against ANYONE posting quotes then not filling them when they're 'hit.' I was an institutional trader at the largest investment bank in the world. I've traded stocks, bonds, currencies, and derivatives in all three of those asset classes. I've traded many, many billions of dollars worth of instruments. In all of my experience trading, NOT ONCE did someone not fill a quote which they gave me. If they had, I would never have traded with them again, because not filling a quite is plain and simple a filthy trick. If you went to a grocery store, and when you walked up to pay, they took most of your groceries off of the belt and said, sorry, you'll have to pay more for these if you want them, would you say that is ethical? (4) I'm against ANYONE quote-stuffing. HFTs do this to bog down the market at certain times. Do you think that is ethical? (5) It is reported that HFTs post false headlines (not discussed in this video) in order to move markets in a certain direction. Please, please tell me you think posting false headlines is unethical.
+Al Mora > HFTs are stepping between buyers and sellers who don't know the HFT is involved. That is front-running defined. - I'm sorry - Mercedess Benz car dealers are stepping between Mercedez factory and car buyers - are they called front runners?
> Doesn't that sound unethical to you? If it doesn't, I'm sorry,
unethical what? selling when somoen is buying and buying when someone is selling? This is unethical? this is called market making. Business as old Egypt and Mesopotamia
> I don't understand your logic or value system.
exactly. you misunderstand the business that's why this ideo looks so impressive to you while it is a bag of lies and misconceptions
+Al Mora > (2) I'm against ANYONE having a speed advantage over anyone else.
you really are? My fiber optic internet conenction is faster than your modem coneection, Should I cut my cable and sell my Nissan GTR just because you drive VW Beetle?
This is why I invest in physical stuff like land, gold, businesses, eff the market and hallow shares...
Since this information is almost 4 years old, were any regulations put into effect to offset this type of stock scalping?
I will not say HFT's are cheaters but they are actually not investing. stock markets are for mutual benefits of Investors and Companies but here only one party gets benefit.
Existence of trading itself is kind of absurd actually if the holding period is not at least quarterly
pretty good video, but has some holes. the way it was explained to me, people always make money off of every single trade, regardless of the actual value of what's being traded, so the money incentive isn't there to stop the high frequency trading. more trades = more profit.
I think crypto could have a solution , decentralised markets... and decentralised governance... game changing
High frequency trading is putting individual investors against AI and we have been losing for years. To much liquidity gets put into the market and the moment the algorithm gets a whiff, they pull out, while people like you and I, cannot react on the same scale. They are stealing billions by crashing the market over and over.
Then go short
Why not make these HFT register to be able to use on the market and tack on a time delay to compensate their sheer speed?
I was in DFEN which is a leveraged Defense ETF. It doesn't have a lot of volume. When I went to take profits I kept seeing the order book change before my order hit. I eventually had to sell low to get out. It's annoying.
it's really nice video..
It's very useful to deal digital savings on bid&ask of time added value in Economy 4G3W