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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: teevee who wrote (105478)	4/8/2014 3:10:49 PM
From: Maurice Winn	Respond to of 217652

Actually, I'm exactly right. What part was wrong? When they play "flash crash" they are being market makers. "Then the buy side weakens they stand aside." As I explained, they don't just stand aside, they create the weakened buy side to see what will happen, to test how robust the downside is. They don't stand aside, they sell into the flash crash to force it down faster. The scaredy cat HFTs stand aside because they can't figure out what's going on. Those willing to duel also sell into the collapse to see if they can outsmart the other HFTs selling into the crash. At some stage they chicken out and start buying. But if they buy too soon, they are facing immediate losses and might panic and sell again. The Flash Crash is a lot of fun and performs a valuable function of clearing Stop Loss orders, ensuring margin levels are reasonable and punishing people who have a sudden forced margin-call sale. They grab the margin call sales at bargain prices and the Stop Loss sales and then the Flash Crash is over and they are sitting on 10% profits. Sometimes there are really big Flash Crashes, which run at a slower rate, such as the Lehman crash and the global financial crisis which was a LOT of fun and a great test of liquidity, debt levels, financial resilience and generally a time to see who was wearing a bathing suit [as Warren Buffett describes it]. Warren was and deployed many $billions to great effect and great profit. People who were not wearing bathing suits were found to be financially naked and embarrassed. The HFTs are fine. I have no problem with them doing million mile a minute supersonic high speed buying and selling. I don't like to wait when I decide to buy or sell something. Bang, they are there before I can blink, offering to buy or sell. The mistake you are making is to think that when buyers are few, the HFTs should buy over-priced shares to keep prices stable, acting as a buffer against falling prices. Mqurice