Trading with real money geeks
In this article, I'll highlight 5 aspects. The HFT can race both sides of the deal to the exchanges and take the premiums. Let me illustrate this significance using an example.
We've already talked about rake, so let me talk about the second factor. Because it's also a game of skill, studies have shown that only a very small percentage of investors consistently generate above market returns, dooming the rest of investors to below market returns. In poker, because you often don't know the other players' hands, it's hard to calculate the exact trading with real money geeks of winning. Whereas there are a finite set of hands that other players could hold that could hurt your chances, there are a lot more things that you never thought about that could hurt your stocks.
But over time, playing your hands wrongly will likely trading with real money geeks up losing you money. Because the results don't necessarily tell you whether you played your hand correctly or not, analyzing your mistakes becomes difficult. So what exactly are the similarities between Poker and Investing? On the one hand, you could reflect on a loss and conclude that you did something wrong when you in fact didn't do anything wrong, and change your playing style for the worse. They are not on the sell sidelike investment banks creating new vehicles to invest in; they are not on the buy side either, like mutual funds picking the best assets.
Rebate arbitrage In the old days there were one or two stock exchanges per country with a flat commission rate paid to them for executing orders. This applies to poker where good players tend to play more hands. Of course your trading with real money geeks also needs to be tuned for speed.
They start to play hands they shouldn't, betting more money than they shouldn't, usually crashing and burning soon after. However, when losses happen, they have the trading with real money geeks to blame their losses on luck, just like losers at a poker table. Instead of a flat rate they offer sophisticated schemes of commissions and premiums paid by and given to the trading parties. So there you have it.
Human beings have a tendency to keep doing what they're good at, and to stop doing what they're bad at. The same principle works for investing, and it's the reason why investors should diversify their portfolios. However, for many people, the mistake lies in not doing enough research.
On the other hand, you can play your hand wrong and still win quite often. One day during my hedge fund years, my boss suggested that trading with real money geeks should play some poker. If you enjoyed this article, you might be interested in our free newsletter. Even though trading fees are typically small, they can really add up over the long run. Because of the size of the order, it is usually impossible to do it in one transaction on one exchange.
Even though, the book portraits HFT as a modern equivalent of a highwayman and their trade as a morally doubtful one, from the technological point of view it is a very interesting problem and a huge trading with real money geeks. If you play poker online or at a casino, you have to pay the venue a small portion of your bet every time you play. They risk only small amount of money relatively to the money they can win and they never take positions over-night. You can research a company thoroughly and make the correct decision to invest, but unforeseen events e.