My heart rate is at a high frequency in this current market

FYI the "blink of an eye" thing is a complete exaggeration. Actually HFT trade hundreds of thousands of times faster than you can blink.

Crazy how much trading has changed over the last 30 years. I read an article the other day on how people use to have to call brokers and pay huge fees just to make simple trades, and sometimes it could take days to execute. Technology has definitely evolved

We let algorithms to perform 80% of the trades in the world, despite algorithms couldn’t even properly manage KZfaq’s demonetisation word list. Woah.

Bots in social media, websites, cyber security, and finally in markets BOTS EVERYWHERE!

Hey guys! Check out nordvpn.com/theplainbagel and use code theplainbagel to get 70% off a 3 year plan plus one extra month for free.

I expected all the top comments to be from a week ago saying "HODL THE LINE"

The Matrix has begun, the machines are going to take down our economy and use us as batteries 😭

Hey Richard. I just wanted to say that I love your videos, and thank you for making them! They are fun, high quality and also really informative. I can't thank you enough. Your videos expanded my understanding of investing and probably changed my life (even tho is hard to tell right now). I really wish the mighty KZfaq algorithm would be more kind to you, I went back and liked every single one of your videos, I hope it helps

Providing high volume of liquidity and withdrawing the offers, is call “quote stuffing” and its HFT’s bread and butter, using it to overwhelm and slow down everyone in that particular market place - even only for a short moment - in order to gain a further edge over the market and pick off the most profitable trade. a denial supply

What a wholesome man

I really enjoy these talks on a level I watch them a little more for fun than learning how to trade and invest. I am planning to complete an economics bachelors, and the school I'm going to offers Business Core Curriculum or a BBA. I hate accounting, but you and some other sources have totally convinced me that I should learn more about Finance and Marketing! Unfortunately accounting comes along with that, but you are awesome!

In my opinion, HFT is a catalyst of instability rather than an optimal source to channel resources from lenders to borrowers. Anyway, at least you didn’t get demonetized this time x)

Hey PB. Could you do a video on inflation? It gets mentioned very often in every economics discussion out there but I do not think I have a clear picture of how exactly it is caused. Why the increase in money supply CAN cause (undesired) inflation? How exactly does that work? And more specifically, I see a lot of speculation about the recent US Fed actions causing the devaluation of the US Dollar, but is that a reasonable assumption? Given that the USD is the reserve currency of the world and all debt in the US is denominated in this currency, so making more of it seems, on the surface, like a good idea for the US. Anyway, I am trying to get a grasp on this and if you find it interesting I would love to see some material about it. Thanks!

They don’t get cancelled because of market manipulation. The price just moves a lot, and very fast. If I want to be competitive I need to cancel stake offers and change them. They’re not reneging or anything, just changing the price to follow the mkt. the media has no idea about HFT bc we never let them in. Spreads were 5-10% in 70s, now it’s

Doesn't HFT increase market efficiency by trading away arbitrage opportunities and getting to the fair market price?

Thanks Richard, as always very well researched video. It shows that you put a lot of time making these videos. Suggestion: It would be nice if you could do some videos regarding the current market situation. We need some clever people like you to voice their informed opinions.

1000 point Dow loss. This last month: Am I a joke to you?

Excellent video and very simple to understand. Love that Metalgearsolid alert sound effect

I really like the positive notes at the end of the videos. Not sure I could take all that realistic talk about economy without it. ;)

Good subject for any trader, as one of those who tried day trading (unsuccessfully). I can tell you this; buy quality, buy cheap, sell when up enough, and enjoy the ride.

Hi I must say I love these videos. They're really well made and informative. I'm just wondering if someone hypothetically had a lot of money (as in tens of billions of dollars) and they decided to buy shares in a gold mining company and then buy a lot of gold thus driving the price of gold up and most likely increasing the value of the gold mining companies shares as well and then you sell the shares in the gold mining company for a profit. Does anyone know whether this would be considered insider trading or not. Thanks.

Very well explained, thank you

Great and informative video! This has taught me a lot. Thank you for the post, and keep up the great work!

Informative and fun to watch. Man, I love this channel.

I remember getting front run many times when using a very popular investment banks software. They basically front run your orders and make a few pennies from them.

I think this guy overestimates the speed of my eye blink

5:30 - Wouldn't reducing the 'bid/ask spread' entail _lowering_ the ask price, and _increasing_ the bid amount? You said it the other way around. Just making sure.

Algo-trading: stocks being Bot and sold?

Posting a bunch of orders and then cancelling 99% is known as "spoofing" and has been illegal for 10 years, and is now aggressively prosecuted by the SEC. It is in fact pretty easy to tell whether it's still occurring or not. You personally may not know the identity behind an order, but the exchange where it was placed does, and everything is recorded.

Hey, can you do a video on stock buy back? This term is being used a lot lately. Unless you already mad a video on it

HFT’s can act as market makers to a degree. What’s crazy is that they have to use dedicated physical hardware in order to do latency arbitrage. A computer is too slow to do this.

Hello from Brazil!! Big fan of yours

I've been watching the markets everyday, virtually all day for the last three weeks. You know something is wrong when an index can swing up and down by as much as 5% up to 13 times a day and never sideways. There is never a period during the day that you have as many buyers as sellers??? Right..

thanks for that interesting description, i should've seen this when I'm writing my assessment reponse.

Very informative thanks

other ideas that would go under this vid subject: price discovery, darkpools and rebate trading

Does scalpers also contribute into high frequency trading?

I lover you content man. Great job.

Conclusion: be a long term investor. Thank you, Mr. Bagel ! - canada

From a philosophical point of view, the market should be a reflection of our (human) perceived value of stocks since this is what a market IS to just about any person. The fact that 80% of the market is a non-thinking algorithm means that the market is only loosely based off of human input (those humans that made the algorithm). I find this to be a huge flaw, even Buffet has expressed negativity. Almost no "good deals" exist because an algorithm will be there to buy it up if so (this is also obviously influenced by the amount of media present and how fast humans can obtain articles compared to the past).

You're the SciShow of Finance!

The time for a trade has gotten so short that some trading firms that engage in HFT rent space in the stock exchange basement to have their computers that much closer to the delivery point.

sounds like front running

Michael Lewis: Flash Boys - a must read for those interested in this.

You get internet points for using realistic-looking C++ function signatures in your pseudo-code on the computer graphic. Actually, those might even be valid signatures. I see no errors in syntax.

The trick is to let them move before you move level 2 helps with this

Wasn’t there a fake tweet and the algos caused a stock to plummet, can’t remember what stock it was though.

another great book on this is "Flash Boys" by Michael Lewis

Gracias

Flash boys is a great read on the subject.

5:30 lowering bid and increasing ask does not narrow the spread, or am I misunderstanding something?

I don't get it PB. At 5:28 you said "The trades submitted by these entities... reduce the B-A spread on stocks, lowering Bid prices and increasing Ask prices". But at 4:00 you said that example stock's Ask price is 50.10$ while the Bid price is 49.90$. If i lower the Bid and raise the Ask price the B-A spread gets bigger, not smaller. Plus: how do HF Traders do money if the spread is negative (aka they lose 20 cents from buying at 50.10$ and selling at 49.90$ each share)?

It's scary how a broken algorithm can practically cause a total market crash if there weren't "limit down" triggers in the stock market.

Is it possible to introduce long term stocks that can be traded only after a certain timeframe - weeks/months/years, with generous yields to make them attractive and create a damper for Wall Street? Something akin to bonds?

So should we forget day trading?

Small correction: at 5:35, the added liquidity raises bid prices and lowers offer prices, not the other way around.

Why do people even engage in that kind of trading and investing? Just buy some stable companies and let them grow for the next 20 years. I'm looking to pick up some amazing companies on 30,50 and even 60 percent discounts right now. $AWK, $LNN, $XYL, $WM, $PEP, $T...

5:30 It's the opposite: to reduce the bid-ask spread you have to increase bid and lowering ask prices ;) other than that a great video

@2:10 Does that 80% figure include when I place a limit order that takes a day or two before executing? I'm skeptical that "80% of trades are by computers" means that "80% of trades are by algo-trading".

Charging for order cancellations would solve this problem instantly and force casual investors to be much more prepared

I will disagree that there is no definition of high frequency trading. High frequency traders are considered with bid/ask spreads and hitting the bid/ask book correctly. They make their money from the spread. This is different from market makers who are by definition liquidity suppliers. HFT have no legal responsibility to ensure liquidity in an asset, and thus can dodge big changes in the order book.

aight

I want to see what people trying to trade was like before the internet😂

A certain 10 percent will ensure its employment anywhere; 20 percent certain will produce eagerness; 50 percent, positive audacity; 100 percent will make it ready to trample on all human laws; 300 percent, and there is not a crime at which it will scruple, nor a risk it will not run, even to the chance of its owner being hanged. -- Karl Marx The actual portrait of financial industry. As a 4th year student at uOttawa, seeing the financial student only have money in their mind without any humanity or basic moral, no wonder why they're so much "illegal" financial operation in the world.

Thanks bagel guy

Hey. Do you have a podcast? Would be great to listen to u on spotify

If passive market makers reduce the bid-ask spread, shouldn’t they increase bid prices and decrease ask prices instead @5:39

Can you do a video covering how brokerages like Robinhood are able to "trade" fractional shares of a stock?

Doesn't a nine percent hit to bid ask spread sorta sound OK if it also saves 17% on market fees? I don't have half your understanding of these systems, but to me, if those estimates of the costs of HFT are close to accurate, the average trader should be better off after the change?

Hi plain bagel. Can you please explain why mortgage rates may go up while bank of Canada cutting its policy rate

Are you a full time KZfaqr or an employee??

When you press market buy "they" will quickly cream the price and sell for you at higher price.

Its such a stupid idea to rely on advanced algorithms. The more complex they get the more volatile the algorithm becomes. Tech is not infallible, and in fact is the opposite due to the artificial nature of these algorithms

Is It possible to make an HFT for Forex?

U can just make the market work on ticks length of a second

I feel a Lehman Brothers, Bear Sterns & AIG dejavu...maybe it's just me...

They need to level off the playing field. This is so unfair for retail investors.

GREAT.

Just stop intra day, why do we even need intra day trading, how does it help the stock market or the underlying companies.

4:02, isn't that just spoofing? which is illegal no? got a warning for cftc once for doing that

Thanks to your Bagel Buddies video I only hear « big-ass spread »

That is amazing but tell me when Everything is CHEAP what do you buy from all ? good business or something that is down the most and has super high potential ?

Thank god for HFTs

Now what is the difference between this and what navinder singh sarao did?

and in most online games bots are illegal because they are seen as cheating. Perhaps its time we started to think the same thing about real money markets.

Can you do a video on "Stop-Loss Hunting"?

How does lowering bid prices and increasing ask prices reduce the spread instead of increasing it?

I actually like HFT it helps me since i always go with the market makers lol.

His bid-ask example assumes someone either shorted or lost money on a long position.

wait so making a program to trick the algos is ILLEGAL? when the algo itself isn't? insane

How much would it cost to set one up in my house?

You'll see tomorrow what HFT does to the market

Wish us retail investors can get in on this and start using algo trading.

Negative interest rates may be coming.

HFT firms compete with each other to fill orders. Just like human traders, a small percentage of them succeed, while the rest go out of business because the competition is fierce. In fact, HFT firms competing with one another for your order flow is the reason we have such tight bid/ask spreads today, which we didn't have 30 years ago. Unlike in the past, retail investors today are able to get in and out of a position with literally one penny of slippage because markets are highly liquid. They are highly liquid because there are so many market makers participating, including algos and HFT firms. Retail traders and investors should be thankful for them. They aren't there to take advantage of you. They are there to provide liquidity. They literally don't care what your order is for, they only want to get you filled because that's their job. Whether it's equities, equity options, futures, or futures options, without those guys we would all be staring into the abyss at the massive difference between what we paid for a position and what it's going to cost us to get out if we need to. This video is a bunch of bullshit that doesn't give the whole story. The US financial markets are the most fair, transparent, and liquid markets in the world. HFTs and algos have to play by the same rules as the rest of us. They don't all make money, just like not all of us make money. They don't have any more edge than anyone else. It's still a negative-sum game for them as it is for us. They have to pay exchange fees just like we do, although theirs are lower because of their volume. It still makes it a negative-sum game, not a zero-sum game. They have to be right on direction to make money just like we do. The fact that there is competition among them proves that. Competition nullifies any edge they have. And we retail traders are the real beneficiaries of that.

Very timely topic. You made it all sound very tidy and neat, but these tools can be used to wreck serious havoc in the markets. A look at cryptomarkets would show you how former Wall Street boys have created the wild wild web of trading. Big players use more and more sophisticated algos, gifted programmers create their own software every day to bypass the wealth divide, and exchanges maintain the High frequency wash-trading status quo. All in all, HFT is the reason why volatility during periods of uncertainty gets crazier and lightning fast crashes become the norm. Let the short-sellers celebrate and party throughout the upcoming recession, I'll just be sitting on the sidelines and munching a plain bagel throughout. :)

Where are the links?

The fact that exchanges sell 'colocation services' to hedge funds (e.g. get your computers as closer to our market engines as possible for a fee!) is outrageous, it is virtual corruption. They're stealing your money.

But doesn't these algorithms make it easier for us, long term investors to make more money since it can cause meaningless volatility and make companies underpriced?