In today’s fast-paced stock market, it often feels like the odds are stacked against retail investors. And you know what? It’s because they are. The rise of high frequency trading (HFT) firms has given them the power to control the price movements of every stock, up and down, every single day.
How do they do it? Well, HFTs have access to trading data from the National Stock Exchanges (NSE and BSE) faster than any retail investor. They have special internet connections, faster than anyone else that gives them data at speeds faster than anyone else in the market. This gives them an edge over the market.
This allows them to make split-second decisions and execute trades at lightning speed- fractions of miliseconds. But that’s not all. HFTs also trade in high volumes, often exceeding 1000 crores. This gives them an edge when it comes to price control.To understand it in depth you can watch this video by Michael Lewis , author of NY best seller ‘The Big Short’ and ‘Flash Boys’:
So, what does this mean for retail investors? It means that intraday trading is a risky game. The odds are simply not in your favor. Instead, it’s best to focus on long-term investments, where opportunities are more evenly distributed. That’s not to say that retail investors can’t invest directly in stocks. They just need to approach it with caution.
If you want to invest in individual stocks, it’s important to do your due diligence. Proper and thorough fundamental analysis is recommended. However, for most retail investors, the best way to invest for the long term is through mutual funds. You can read https://r1hedge.com/is-sip-in-mutual-fund-best-for-retail-investors/ to understand benefits of long-term investing. By investing in mutual funds, you can benefit from professional fund managers who have the expertise to navigate the complex world of investing.
Pingback: 5 Common mistakes by stock market investors | R1Hedge - R1Hedge