Crapshoot Investing

“Crapshoot Investing” is a book about the possibility of flash crash on 6^th May 2010 thanks to the evolution of tech-savvy traders and clueless regulators… This is the first ever book (on my shelf) that goes deep into high frequency traders. In this book, the author tried to explore the possibilities of market havoc since the introduction of direct market access and the omission of middle men like brokers and market markers. It is always interesting to study high frequency trading. In fact, it is more interesting to see whether high frequency traders are evils or geniuses… LOL

The whole story is scary enough. The discoveries by Sal Arnuk and Joseph Saluzzi really scared off retail and institution traders. Those days, retail players may have problems. These days, with the high frequency traders, institution players found themselves in big trouble too. At the end, nothing is perfect. At the back of each benefit, there are always some flaws and the possibilities of unexpected black swan. Well, that is life after all…But, the more a reader goes deep into this book, the more he find himself expose to unnecessary risk. Read this quote as a good example: “High frequency traders often found other investors by issuing and the cancelling orders almost simultaneously. Loopholes in market rules give high speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits – and then disappear before anyone knows they were there.” Hmm…

The author did enough checkup on the whole issue with detail analysis taken from everywhere in US along with views from relevant parties. At the end, the facts that high frequency trading still remains until today shows that there are certain benefit (perhaps to certain parties ONLY) from it. My view is quite simple. This whole issue affected perhaps institution and big sizing retailers. The irony part is… high frequency trading supposed to enhance and creates bigger volume. Yet, as size gets bigger, they become victims of the said revolution. Again, it drives back to the same conclusion: Nothing is perfect! The more we want sophisticated stuff, the more we need to defend. Sounds weird, but true…

Rating wise, this is an important read for traders around the world. Honestly, I have certain skepticism. But, it should not be a hindrance to open up my mind on any possibility.  As such, I am rating it at 9/10. A well-written book… thumbs up!