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Mark Cuban’s Idiot’s Guide to High Frequency Trading

Mark Cuban’s Idiot’s Guide to High Frequency Trading

A really easy way to understand what all of the hype about high frequency trading (HFT). Basically, they get the information milliseconds before everyone else and likewise can act that much faster. It really is cheating. I’ve picked a quote from the article that sums it up pretty well, but the whole thing is worth reading.

“IMHO, this is the definition of High Frequency Trading.  Taking advantage of an advantage in speed and algorithmic processing to jump in front of trades from slower market participants  to create small guaranteed wins millions of times a day.  A High Frequency of Trades is required to make money.

There in lies the problem. This is where the game is rigged.

If you know that by getting to the front of the line  you are able to see or anticipate some material number of  the trades that are about to happen, you are GUARANTEED to make a profit.  What is the definition of a rigged market ? When you are guaranteed to make a profit.”