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Ask the Analysts: What chance does a single investor have against high-frequency trading?

posted on July 22, 2014

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What chance does a single investor have against high-frequency trading?  In each Ask the Analyst segment, experienced commodity market analysts provide thoughtful insight on trading skills, price trends, and strategies to help students and producers better understand how the markets work.

What chance does a single investor have against high frequency trading?

Mark Gold: The average guy in the short-run, trying to beat these high frequency traders, as a day trader, is in for a very tough go. Now, there are plenty of computer programs out there available to the public that try to look at relative strength and moving averages to try to give a guy an edge on some of these things. Personally I'm not a fan of those programs and I find them difficult to work with, let's put it that way. But in the short-run if you're trying to day trade these markets against these computers, I think you're in for a very tough time. What you can do is these computers really only affect the very near-term prices very quickly. So if you're a long-term trader looking at trends over a period of time, the high frequency traders will have very little to what you're doing. 

John Roach: The high frequency trading causes a lot of noise in the market and the algorithms and so forth, I mean, there's -- but the bottom line is the biggest money that is made in the market is getting onto a move and staying with the move for a long period of time. 

Sue Martin: These guys use high frequency trading, it's on computer and boy they hit that button and it's gone. But -- and they have people hired to do just that. But the thing is, when an individual is there trying to do their investment and make a trade, you're looking at something longer term. If you're looking at day-to-day the odds are stacked up against you. Markets trade 22 days a month and that makes your odds pretty tough if you're going to be trading every day. You should be looking at a trend. 

Tomm Pfitzenmaier: Well, that high frequency trading thing is much ado about nothing as far as I'm concerned. And that is mostly related to the equity markets. If I buy Apple stock at $500 and it goes to $550 I don't really care. If somebody took a hundredth of a penny when I bought it, I'm a bigger picture guy. I understand that one of the issues, and I've got the issue, is these reports coming out during the day and some people get information quicker than others and there's some disadvantage I think to that. But, I don't know, I don't really get that shook up about that. 

Don Roose: Well, I don't think high frequency trading is a problem for most people actually because the people that are high frequency traders they want to get in and out of the market, I mean quick, I mean like in seconds. And we've seen crop reports come out and that actually has been a problem for high frequency traders. They get in because they think it's right but they have to make sure that they're right, you know. So I guess we really think the success comes from long-term and kind of getting with trends, moving with trends and so you don't really have to be a high frequency trader. 


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