I doubt that there is much room for the "little guy" to lose... In a one or two penny spread world. And the "little guy" is just gonna get cheated the old fashioned way by his broker... And there are 1,000,000 standard, traditional ways to skin a Customer. One way to view Algo Trading... (Obviously an over-simplification)... Is as a pure Zero Sum Game set apart from the mainstream. At 50% of volume and climbing... Elite black boxes are taking money away from poorly implemented Off-The-Shelf black boxes. With fixed transaction costs for 1 msec operations ** starting ** at about $50,000/month... (There was a detailed cost post here about 3 weeks ago)... Probably 90% of Algo operations are gonna run at a loss... While the 10% Elite Algo operations take away the money from their direct competitors... JUST LIKE ALL ZERO SUM GAMES. (Though a small part of the profits would come from exploiting market ineffiencies). So Mr. Cummings is a genius... and is crushing his Algo competition. This is the most serious game... And unless you have Top Six Figure Quant and Software Talent slaving away for you... Then you competition does... and will eat your lunch.
Same firm - different article - published today. http://www.bizjournals.com/sanjose/moneycenter/story.html?id=3498
Yeah, well I am just hearing about tradebot, but I smelled their stink years ago. Anyone here scalping ? Doubt it.\ And any Bright traders that lose, Don refunds it in the form of Starbucks Lattes.
Well, about 40% of all trades are done by computers. So somebody is spending lots of money on those algorythms for nothing...