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Monday, October 11, 2010

60 Minutes on High Frequency Trading

If you thought we were all running on an even playing field as retail investors, well you would be wrong.  High frequency trading has made the market a very uneven market place.  Some in this 60 minutes video say that it makes trading better by adding liquidity, but as it has been pointed out in the market-ticker these high frequency trading machines are also used to falsely elevate prices by bidding on stocks at a higher price and withdrawing the bid before it can close.  This creates prices to rise or fall without any real fundamentals behind it.  Big investment banks (the TBTF) can now steal money from the stocks and ultimately you by manipulating prices.  If they decide a stock needs to go down they can execute it in that direction which causes you to lose in your position (when you panic and liquidate or makes you take longer to get value).

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