Hello dear community members !
I want to discuss about the latest public debate that concerns all community trading :High Frequency Trading or short ( HFT ). Have you heard before about HFT and the impact it has on the market ?I hope so ...Ok , in this article i want to discuss about :
  • What is HFT ?
  • Who are the big flash boys ?
  • It is good or bad for society ?
  • It is fair or not that someone has the power to be the first in every single order ?
  • What we should to do get protected from them ?

High speed trading is a hot topic nowdays and a huge money maker… They are calling with different words such as “The New Normal “, “The Crazy Race of Humans vs Machines” , “The Algos Battle “ recently I ‘ve heard even “The Fast and the Furios “metaphor…Definitions differ, but at its most basic, high-frequency trading implies speed .High Frequency Trading ( HFT ) is a computer complicated algorithem that makes trades in the most shortest timeframe ever : in a fraction of one second, wining and losing millions of money in a blink of an eye…This technological environment has been successful for market makers and HFT trading firms scalping the market in milliseconds for making us belive that are gaining pennies from here to there but situation is vastly different .They are making millions on the back of retail traders .They hope to make money on the difference between how much investors are willing to buy and sell a stock, or the "bid-ask spread." They do this by selling and buying on both sides of the trade, so all the trading decisions are made by machines not by humans.

  • Who are the big flash boys ?
All market maker in forex, stocks, options, futures,hedge fund big and small brokerage trading firms are trading with HFT but the big flash boys are :
  1. Knight Capital Group
  2. Citadel investments Group
  3. GETCO
  4. Sun Trading
  5. Jump Trading
  6. Hull Trading
  7. Tower Research Capital

  • But is a good or bad thing for society? All trading community is concern about this .If you ever noticed the market is changing continuosly , Stocks, Futures, Options, even Fx too.I searched for some clues in HFT and I found only this useful chart, look carefully in 2010 around of 60 % of algorithmic trading is made on USA , 30 % in Europe and 20% in Asia .I didn’t found latest data but I think and I bet that those % are increased no matter the fact if the balance is pointing advantages or disadvantages of this crazy thing.

The first time I heard about HFT I get confussed and realized that’s why the market mostly is in range recently and
some of chart patterns doesn’t work and after the flash crash of May, 6 th 2010, where a algorithm error causes a millions of dollars lost ...We know that forex market is strongly correlated to stocks market As stock market prices rise and fall sharply currency prices generally head one direction in a volatile manner. This makes it slightly more difficult to catch the big trends that are going to make you the big money.More often by this situation we are losing money .Stock market isn't giving safety to investors ,soon will happen even in Forex and the funniest thing is that SEC is promoting those HFT firms and still didn' take any measures ...

I saw mini flashes in forex too during big impact news because according to latest data forex is 50% driven from algo firms .To be or not to be ...legal and useful ... this public debate is to be continued ...I always thought that I as a retail investor I will never be able to compete with HFT trading firms as they are playing pinball with price action. In the charts below you will see some examples of HFT impact the first is in EUR/USD and the second USD /JPY in 10 sec timeframe of May 5, 2014

In fact I never liked the idea of the New Normal of price action so I decided to sample in an infantile way the process of race between Retail traders and HFT traders . Have you ever saw Wiley il Coyote and Road Runner cartoon …? I bet on of course .Well small, simple and retail investors are : Wiley that no matter how smart is he with its methods he never catch the Road Runner because of the speed.So no matter if your strategy, money management, trading philosophy is good ,Road Runner traders always will impact the market and price action with their speed.

This advantage of speed by getting the latest information and placing and canceling orders in miliseconds are driving crazy most of the Retailand Institutional traders all over the world.

  • It is fair or not ...? Well based on my opinions IS NOT ... for some reasons :
  1. They dominate the market : If you have the fastest access in having first information , this will give you an edge to jump in front of those investors and to change price action
  2. They are testing frequently support and resistance levels creating a channel when price action range , thats why only 30 % of the time we have a good and solid trends in higher time frame
  3. They are testing to much the psychology of the trader, a lot of investors have a lack of confidence nowdays...They are blaming theirself , their system, money management rules etc for losing money instead the reality is quite different
  4. During big impact news they can create big gaps or mini flash crashes to eat your money like pacman
  5. HFT firms are money maker and market maker ,would that mean : they are the market and they are creating the market
  6. If they are market makers their mission is : to search and hunt for investors stoplosses .What does this mean ? Well, HFT are promoting than they are creating liquidity, a volatily market with tight spreads and fast execution orders , ok one part of these are true but the real truth is that they are hunting about pocket of liquidity in terms of stoplosses They use dealing and arbitrage strategies make markets liquid by providing investors with opportunities to trade , decreased transaction costs to grab more clients and thats why nowdaws 95 % of retail trader fall to make money because HFT ARE THE REASON WHY WE ARE LOSING MONEY , THEY MANIPULATE THE MARKET !!!

  • What we should to do get protected from them ?
Well i am not a successful mentor , not so professional to give you proven methods how to get protected by i can give you some clues :

  1. Before choosing your broker , be sure that is not a market maker , make a lot of research...like what type of broker is, regulated or not , use HFT technology or not , fees, be sure that is a true ECN broker company .
  2. Don't trade during foundamental news, the sharks are waiting for that moment .
  3. Don't trade those chart pattern that doesn't work anymore like head and shoulder pattern , bullish/bearish engulfing , flags on the top/bottom etc try to figure out new patterns , the market is always changing try to notice new signals for good and sold entries in your system .
  4. Have a system to trade for each type of market and always develop your system , and have different strategies for scalping, daytrading , and swing trading Newbietraders make the mistake of thinking that one system will work for all market types. They mistake a system not working right now with the idea is that the system is broken.Smart traders spend a lot of time coming up with a system or a way to define the kind of market we are in at the moment and then they use this as one of the key building blocks for their systems.For instance most grid based system works in less volatile markets or volatile and counter trending
    markets.Most trend following systems work better in Quiet and Trending markets.A mean reversion system works best in Counter Trending markets.
  5. Try to change your attitude about stoplosses, what is said recently , about methods of putting a stoploss etc, i personally in my live trades don't put stoploss in my platform , personally don't trust so much , i use manual stoploss or take profit for scalping and daytrading .I try to figure out a good entry and to catch my profits asap , still now it gave me good results instead of the cases when i put stoplosses to my orders.
It is my first article here , trying to be as more proffessional as i can , i am open to accept all your opinions about this topic and to discuss with you.All your likes and opinions will be appreciated

Thank you for your time !
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