By Michael Durbin

A designated PRIMER ON present day such a lot refined AND debatable buying and selling TECHNIQUE

Unfair . . . remarkable . . . unlawful . . . inevitable. High-frequency buying and selling has been defined in lots of other ways, yet something is for sure--it has reworked making an investment as we all know it.

All approximately High-Frequency Trading examines the perform of deploying complex computing device algorithms to learn and interpret industry task, make trades, and pull in large profi ts―all inside milliseconds. no matter what your point of making an investment services, you are going to achieve worthy perception from All approximately High-Frequency Trading's sober, target factors of:

  • The markets during which high-frequency investors function
  • How high-frequency investors profi t from mispriced securities
  • Statistical and algorithmic suggestions utilized by high-frequency investors
  • Technology and strategies for development a high-frequency buying and selling process
  • The ongoing debate over the benefi ts, dangers, and ever-evolving way forward for high-frequency trading

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If the stories of the high-frequency trading bonanza are even somewhat on the mark, you might as well set the wayback machine to 1849 and ask the successful gold miner to show you his stake and let you dig around for awhile. Indeed, the high-frequency trader will be even more protective than the 49er because trading strategies are extraordinarily portable. 29 Aside from this obvious profit protection motive, it’s also plausible that some HFT firms may not want anyone to ever know what they did to extract their gold—and to have those actions examined under the klieg lights of ethics and legality, even after their stake is mined out.

The Arbitrageur In the physical world, massive objects such as planets draw less massive objects to the center of their mass due to the powerful and persistent force of gravity. Gravity is always there, ready to bring airborne objects back to earth, be they beach balls, baseballs, or buttered toast. In the financial markets, we find a similarly powerful force known as the law of one price, the consequence of something known as the arbitrage pricing theory, which keeps the prices from straying away for too long from one true price.

By “pure” market-maker, we mean one who is working only for the spread and/or rebate and is not also applying arbitrage strategies. In most markets, investors and marketmakers are hugely dependent on each other. 1 But as we saw in the previous chapter, they have diametrically opposite preferences when it comes to the spread: market-makers want it wide and investors want it narrow. As such, investors and marketmakers are at natural odds with one another. It’s not quite the Hatfields versus the McCoys, but neither is it Fibber McGee and Molly.

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All About High-Frequency Trading by Michael Durbin
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