Before someone gets hurt accepting the absolute horseshit commentary in Noahpinions recent post about the "healthy side-effects of HFT", I am compelled to respond with accurate insight as one of the 1% (he cites) that trades successfully. He highlights day-trading and stabs at Zero Hedge which appears to have undertones of an individual who can't trade and it is apparent why when you see the ankle deep depth of his research into HFT.
The simplistic analysis, low-brow stab, and fluffy commentary strikes a cord that only a Buzzness Outsider intern could associate with. To begin, Noah isn't scared of Flash Crashes and cites a drop in HFT revenue as his reason for viewing HFT as a "minor nuisance". To that, I ask him how he feels about locked markets and hidden orders. Or, as a long-term financial manager (since he is a professor I would assume he understands long-term money management and the legality of it) how he feels about failures in best execution when it comes to fulfilling fiduciary responsibilities.
I won't comment on active-traders of the past, as for active-trading since Reg-NMS, these traders have had trouble because of the problems with the micro-structure as constructed by HFT firms through HFT lobbyists. The Dark Pools book highlight this problem very well with Haim Bodek and Trading Machines. Haim's firm was robbed of capital because he was not informed through the "expert-networks" about the silent revamp of the US equity market trade-matching and order-routing structure. Haim only realized the problem because he conversed with someone from one of the exchanges about "special-order" types.
The For-Profit US exchanges silently altered the playing field in favor of high-paying clients that were willing to trade high-volume if they had special orders to use that the general public was unaware of and could also buy User Account ID's and co-locate at exchanges to heavily trade around things like the Consumer Confidence number that they were buying from Thomson/Rueters and University of Michigan to trade on the information two milliseconds before everyone else. How do you feel about that Noah?
Fluff pieces like what Noah has written are very damaging to unversed readers. Be careful guys what you read and who you read. Nearly everyone out here is willing to take stabs at the real people because people like Zero Hedge, BTFDtv, Themis, Nanex, and others are talking about unsexy things that matter and these academic professors are so disconnected that the errant thought in their arguments strikes at the core of their ego, which is that they are Ivory Tower geniuses who wear sweater vests and cuffed khaki's with creases and are always right because they put their thoughts into some arbitrary accepted format called a White Paper.
As for "day-trading", that's not my place for comment. I've made money with various trading styles at various times. I mentioned in my Casey Research interview that talk about HFT and highlighting market structure faults would hurt my strategy at the time (ETF/Equity arbitrage). When a specific level of HFT activity was identified, given the sequence of orders that were being sent also, offered me an ability to capture 0.3% to 0.5% on SPY, every week for nearly a year. After the BATS IPO and the same day Apple-Stub quote problem, that form of Alpha generation died slowly until it was no longer viable in August of 2012. So "day-trading" in the conditioned sense is brutal and tough. Active short-term/long-term management is what any self-respecting person would do, outside of the hectic style required to trade futures.
As for "day-trading", that's not my place for comment. I've made money with various trading styles at various times. I mentioned in my Casey Research interview that talk about HFT and highlighting market structure faults would hurt my strategy at the time (ETF/Equity arbitrage). When a specific level of HFT activity was identified, given the sequence of orders that were being sent also, offered me an ability to capture 0.3% to 0.5% on SPY, every week for nearly a year. After the BATS IPO and the same day Apple-Stub quote problem, that form of Alpha generation died slowly until it was no longer viable in August of 2012. So "day-trading" in the conditioned sense is brutal and tough. Active short-term/long-term management is what any self-respecting person would do, outside of the hectic style required to trade futures.
