One Way to Unrig Stock Trading (nytimes.com)
The alleged ‘dangers’ of algorithmic trading, including high frequency trading, is mostly hype by the doom and gloom liberal media. People and institutions lose money in the market because of bad timing and bad money management, not because of automated trading. Nowadays, most stocks, ETFs, and futures contracts are extremely liquid, allowing anyone to get filled very quickly, with minimum slippage (the spread between the bid and ask). One can easily buy a million dollars of Microsoft or the S&P 500 without moving the market too much. When hedge fund and retail investors lose money and or lag the S&P 500, it’s not not because they were front-run by a bot, but because they invested in bad sectors, an example being Carl Icahn’s bad bet on Chesapeake energy (the stock has fallen 70% since 2012). There are other examples: buying dotcom stocks in 2000, or bank stocks in 2006-2008, in which lost fortunes had nothing to do with algos, but rather bad timing. When the underlying company goes bankrupt or the stock falls 30-90%, does it matter if you got front-run by a few pennies? Rhetorical question, but I suppose it’s more appealing to blame someone else than blaming yourself for what is bad timing & strategy, and poor money management.