HFT and Precious Metals Price Management - Getting Easier Every Day
Regulation within a market tends to make it harder for legitimate traders to operate because every 'edge' they identify essentially becomes insider information. Nevertheless, the powerful electronic traders are still allowed legal access to front run pricing and large orders on the exchanges by being permitted to locate their servers onsite.
Furthermore, the unusually large sell orders seen in the silver market seemingly on a daily basis, so not seem to be executed so as to maximize the selling price obtained for a commodity. Instead, such orders appear directly aimed at influencing silver market price action and forcing it to the downside.
Technical Trading Makes Markets Easier to Manipulate
Interestingly, today's markets seem even easier to manipulate than at any other time in market history. This is probably due to the fact that so few of the large traders use fundamental based or discretionary trading plans, instead typically preferring to use technical analysis based systems.
These large traders, which now make up the bulk of silver market trading volume, have almost universally gone over to algorithm trading that is deliberately designed to bypass and eliminate human emotion or decision making, while at the same time speeding up deal execution dramatically.
How HFT Works
Most high frequency trading or HFT programs operate on the basis that once a price level is violated which kicks off either the buy or sell side of its algorithm, the execution of large and appropriate transactions then becomes automatic. The trading firm that initially started the price action moving is then often able to make a boatload of money as the mindless machines do exactly what they were programmed to do, without feeling human emotions like fear, greed, hope or compassion.
Just like market managers and brokers, the remaining discretionary traders increasingly appear to be a vanishing breed. One can only hope that smaller long term silver investors can stomach the downside volatility that HFT trading systems often cause in the market until silver’s impressively favorable fundamentals are eventually able to re-assert themselves.
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