I dumped half of my long positions yesterday before the close. Here's why. The S&P took all day to complete a pattern and price objective it should have easily completed during the opening thrust but failed to. That was counter to my expectation. And I always trade with an expectation.
It is entirely possible that 1752.70 was A, yesterday's high was a B, and that a sharp C down is in the works to below 1750. 1740.50 remains the hard stop.
If not, fine. The market will go higher.
The video below is a must watch. It exposes the HFT industry. Ordinarily I don't give High Frequency Trading much thought, but it's basically organized theft officially sanctioned by the major stock exchanges in return for volume.
The important thing to note is that they are parasites of order flow. Without order flow, without a "market," they've got ZERO trading strategy other than mechanically exploiting changes in price using algos. (Listen carefully to Dave Lauer at 34:29 and Haim Bodek at 40:30.)
As I said on Twitter last night, the antidote to HFT is simply to learn how to TRADE, to understand psychology, and to embrace uncertainty by using discipline and rules.
All black box trading systems are doomed to fail by their own success. Instead, make sure your "system" is based on sound trading principles, rules, and actual skills. There is no Holy Grail.
Another thing: use mental stops instead of mechanical stops, and have the discipline to honor them. Mechanical stops feed the parasites. Mental stops add to your experience under fire (and you will be fired upon).
These guys are very courageous to come out with their stories. I salute them.
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