(AllAboutAlpha.com) – It is by now common knowledge that High Frequency Trading comprises 70 to 75% of market trading in North America and western Europe. And it helps to remember that the primary usefulness of algorithmic trading is to provide liquidity to the investor class. We presume that the distinction of said class is that its investment time horizon is a minimum of an hour, although longer holding periods of days, weeks, or even years, are alleged from time to time.
Of course, the longer your investment time horizon, the less sensitive you’re likely to be to the liquidity in the market place, because most of the time, an hour or a day or two might not make so much difference in your portfolio operations. It is, however, comforting to know that 70% of the marketplace activity is there just so that you, part of the 30% investor class, can sell your shares a teensy bit better on the day you decide to go to the souk. Still, residents of the virtual world we will call Algorithmia do seem to be providing liquidity mostly to each other and making money doing so. Which would make one wonder, do Algorithmians need Investors more than Investors need Algorithmians?
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