Beat the Flash Traders

Let’s revisit high-frequency trading and the stir caused by Michael Lewis’s new book, “Flash Boys.” Lewis says high frequency trading means the market is “rigged” against the little guy. This post says that’s always been the case. For a host of reasons, independent individual investors never have had a chance to trade better than the investment firms. You beat the flash traders by not playing their game. Don’t try to trade stocks or the stock market. Instead, invest the way a normal person should.

Here’s what you need to know:

* Short-term trading is a loser’s game for most individuals. How can you compete against robots and ultra-fast fiber optics? You can’t. So forget about day trading. It’s a sucker’s game; even if you think you have the best information and insights in the world, you are not going to get a fair price. You can’t beat the machines.

* You can’t make money due to transactions costs. You’re paying retail prices for commissions. Even at deep discounts, you don’t make money until you beat the spread and clear your commissions. Brokers love it when people trade because they make money on buys and sells. They don’t care if you make money — they always profit.