Sharks Trade In Milliseconds. I Invest for Centuries

The SEC is investigating Reuters and the way they release data. It all seems to hinge on a 15 millisecond violation.

Do you live in a 15 millisecond world?

I believe this investigation will be important for the investing public. I’ve been writing about this already, and I will be watching closely as more details emerge. I hope this story will garner enough of the media’s attention that it trickles down to the investing masses. Hopefully it will hammer home the fact that real wall street traders live in a completely different world than does the trader sitting at home with his discount brokerage account and the internet.

15 milliseconds….that is 1.5 hundredths of a second. It is a period of time that is unfathomably minute, and yet it is plenty of time for high frequency traders to try to make a buck by trading with information earlier than everyone else.

Really, it sounds absurd doesn’t it? These are the sharks that are after you if you are trying to be an active trader from home.

The more things change, the more they stay the same

I also want to address any complaints that the stock market is now more “corrupt” or more “rigged” than it was before. Technology has changed for sure. Everything has sped up. Your computer at home gets information seconds after it is released, but the sharks get it 15 milliseconds before the release. In the old days, where information moved more slowly, the disadvantages to the home investor were actually more extreme. It’s not like it was easier to be an active trader in the old days when you got stock information once a day in the newspaper. Plus the broker’s cut of your trade used to be quite a bit more. Frequent, active trading has always, always been the wrong game to play.

There is a great solution. You can be an extremely successful long term investor in stocks without being an active trader. This has always been the family’s best bet.

Photo by Hermanus Backpackers