Unformatted text preview: possible profit from trading. These machines only look at one thing when calculating algorithms, the price what they buy the stock for and then what they sell it for. Again this is so that the investor can make a profit by selling this stock for a lot more than what it was paid for. For example there might be a stock out there that is currently $50 and the computer is 99.9% certain that it will go up to $75. The computer automatically buys this stock for $50 and then sells it for $75 which will generate the investor $25 per share. The best part is the investor didn’t even have to do anything. They have an unbelievable speed advantage over a human. They can compute over a million different trades within only five minutes. Since everyone has the same machines it is hard to have a competitive advantage. The only way to get a competitive advantage is to ask for quotes from other machines that way this increases their latency and slows them down for a little bit....
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This note was uploaded on 02/22/2012 for the course ACC 311 taught by Professor Crampton during the Winter '11 term at Jacksonville College.
- Winter '11