High frequency trading has became very popular topic recently thanks to
Zero Hedge. I saw couple weeks ago a video, where a HFT trader Manjo Narang explains how it works. When a strategy has 52% probability of be right, you can transfer it to be profitable not by making a million dollar bet on it, but you can make a million bets with one dollar. Because of law of big number, you win 520.000 times and loose 480 000 times for a net gain of 40.000 dollars... How easy :)
Yesterday in
Financial Times article by Jeremy Grant and Michael Mackenzie I saw this chart, which explains how HFT trading affects the markets. Average number of trades per day is rising, but average shares per trade is falling.
I'm sure readers are aware, that HFT is skewing the market and can be dangerous. We saw it in Rambus (RMBS) shares recently.
Anyway, video is really interesting and you can watch it
here and read article
here.
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