The stock market is increasingly dominated by high frequency trading firms - they get in and out fast, making minuscule amounts on millions of trades. I wrote an article for Financial News in January that pointed out how the new market structure - electronic trading, multiple destinations - benefits high frequency traders. Often to the detriment of more traditional buy-and-hold investors.
Joe Saluzzi, an outspoken source of mine who is co-CEO of Themis Trading, said in his blog last week that just because volumes are increasing doesn't mean more investors are coming into the market. On the contrary, the increase in volumes is mainly down to the high frequency stat-arb traders who are goosing the market in order to increase volatility. Only in a volatile market can they make money. This trading pattern is misleading ordinary investors to think that the current market trend is real. If the buy-and-hold crown jumps back into the market and it turns out to be a Fool's Rally, they will not come back again for a very long time.
I'd buy shares in the high frequency trading firms, personally.
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