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I am a professional day trader, and in past articles, I have written mainly about the principles that can keep you out of all sorts of trouble when trading.
Today's column is different. I will get a little more technical because I have to explain the change that is happening in day trade The world is a change that is also an opportunity.
When referring to “ankle biters”, I mean that the daily trading has historically been a small part of the general stock market. The profession was not appreciated by the main media as even a profession. In place trades in Gamestop with the other. This sells us short professionals, but it was easier to be away from the traders of the day then.
No more. Now, daily traders in only three intermediaries represent almost 25% of the entire US market. The share market share in the stock market is actually essentially larger than 25%, given the results of other intermediaries there.
Only about ten years ago the stock market girlfriend was hfts or High -frequency traders. They were more than 60% of the market then and the theme of books like Michael Lewis Flash boys. Now they have fallen to about half the market, and the trading of the day is raised and fast.
Don't wrong me – the last thing I advocate is to try to beat the hft crowd in their game. They still have about half the market, essentially unlimited money to employ the brightest, and they measure the amount of their computing power on the hectares of server.
So no, the plan is not to beat them in their game. Fortunately, we don't have to. We can continue to grow by trading shares they have no interest or trade skill. First, let's see what they like.
Connected: I lost so much money making these trading errors
Shares that hft -like to trade
1. They require actions that – at any given moment – trade in a relatively narrow range of prices (ie, offer and require “spread” is small). With the extraordinary volumes of these Hfts trade, they are pleased to do what they look like as small profits in any transaction because, as the saying goes, they can do it in volume.
2. Next, just like hft -likes tight price levels, they also like low instabilitywith that narrow range not moving up or down too much in price. If the HFT would be manufacturers, they would be the ones who built a beautiful, predictable supply chain.
3. The third type of shares of hfts is another acronym: ETF or Traded funds. These are stock baskets or other investments and many combine the two factors I mentioned above: they trade with narrow spread and relatively sustainable prices.
4. High -priced stocks are the fourth preferred feature of HFT because they allow more possible profit.
5. Finally, hft prefer well -created shares with many unpaid shares. They like trading in high volumes, but prefer that the size of those volumes does not change much. Again, a predictable supply chain.
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Shares I like to trade
I disagree with the old saying, “If you can't beat”, join. ” I don't have billions of reserve or more to build my HFT platform. Therefore, my saying is, “If you can't beat, do the opposite.”
I want to be the biggest foot. I want to put my money under the radar of the HFT people. This means look at the HFF stock criteria that I ranked above, but with radically different preferences.
1. I focus on the shares that are Relatively free. My sweet point is the shares that trade with $ 2-20, preferably in the $ 3-5 range. This is far from the highest profile shares like Tesla, Apple and Nvidia that trade in hundreds of dollars per share.
2. I want to trade shares that are in the news. It can be a biotechnical action with news about a drug that FDA cleared today or news of the Union. These things serve as a catalyst that makes other day traders sit down and focus on shares.
3. I seek the opposite of predictable trading shares: I want those that have increased at least 50% today compared to yesterday's price. Why? This type of action is a giant dog whistle for all retail traders around the world. The stock will be highlighted in millions of computer screens at the moment. It is not uncommon for these super active shares to trade with 300%, 500%, or 700%of the country where they were only yesterday. Hftte hate that kind of stock and it makes me smile.
4. I love it when shares trade by 500% or more their 50-day average. Another beacon for other traders to focus on this action.
5. I like the number of shares available trade (“float”) to be below 10 million. This means that any great interest in shares will send it flying.
All these criteria sound like a lot of work, right? Fortunately, we live in a world where stock scanners can now monitor all these criteria in real time. You don't have to hit the books and do research. In fact, any analyst research is useless for day traders because it is written in the past. I focus on what is happening now.
Once I have an action in my images that meet my criteria, I am halfway at home: I am not competing against HFT computers; I am competing against other traders with all their fear, prejudice and emotions in the game. Now, I just have to be more disciplined and know that most of them so that I can have a good day.
If you are also an ankle, the fact that retail trading is grabbing the market share from computerized trading should be music in your ears. There is money to be made in unstable, emotional markets.