Thursday, May 23, 2013


Obviously US equity exchanges have not terminated their relationships with high frequency traders as we continue to see the evidence of "flash crashes" where in an instant (or less) specific stocks are taken to the woodshed and destroyed, only to have much of their value returned a moment or two later.

The problem of course is that if you were unlucky enough to enter in a market order to sell at that instant, you would be crushed and lose significantly.  Additionally, if you were smart enough to have a stop in place, you got crushed unless you entered in a stop-limit order (although it probably gets executed as the stock recovers).  Ultimately, the loser here is the smaller consumer-type retail investor and we continue to see nothing done to lessen the power and control these automated systems have in our stock marketplace.  It is even more of a joke to hear that these connected and wealthy firms have a physical presence in exchanges where they get an advantage in terms of communication time and speed.

Here is a great example of how wonderfully these can impact a simple dull little stock like a utility!  Check out AEP on a 2 minute chart and also a Daily Chart.

Wouldn't it feel nice to leave your computer for a second and return having sold your position $10 less than where it is trading?


Technology helps provide liquidity doesn't it?  If that is the benefit from all this technology, I'll pass.


Goatmug is an investor that cares about you and your family. Goatmug's Blog - Financial Perspectives From The Mountain Top is a collection of thoughts on our economy and how it impacts the lives of investors and average people. While several specific investments are named in many of his posts, these articles are simply invitations for you to do your own research and reference to these securities does not constitute financial advice. Your situation is complex and unique and you should seek professional assistance with your trading and investing. Please visit Goatmug and share your comments at

No comments:

Post a Comment

Thanks for commenting.... if you are leaving spam or any link that is not related to the post, your comment will not be approved.