The stock market’s recent rollercoaster ride, sparked by concerns over Greece’s crumbling economy, only serves to emphasize the closely linked nature of the global market. To think that events overseas–whether positive or negative–will have no effect on the U.S. economy is to engage in a game of denial with potentially cataclysmic implications. The question that arises now, and the mostly unanswered question that’s on every trader’s lips, is how do events in Europe present trading opportunities here?
High frequency stock traders could very well be the modern-day equivalent to Neolithic hunters of old (albeit far better dressed), hunters darting in and out of the path of hungry lions in pursuit of elusive game. Or in this case, achieving stock profit through calculated pinpoint attacks. And although HFT firms have recently fallen under the scrutiny of the SEC, it may just be the high frequency trader—and the clients that they service through both black box and active manual retail trading strategies—that emerge from this mess unscathed.
Simply put: a see-sawing market is the HFT’s turf. It gives them the home field advantage. And where pundits have pointed the accusatory finger of blame at HFT’s for last week’s stock market free fall (and subsequent bounce back), it makes far more sense to aim it at the panic sellers who only served to exacerbate the situation.
In a world of cold comforts, it’s reassuring to know that market volatility isn’t the bane of the high frequency trader—it’s the lifeblood.
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