i know, i know... it's good....until the time when YOU have to exit . i'm not playing that buy and hold forever game... and that 's exactly what happens during that flash crash. cause there is no real liquidity and never was any. HFT have all the benefits, but no obligations of providing orderly market..and that's we have a wild wild west today. at least on stocks.
Depends on the type of volatility. When 10 price levels vanish suddenly in one second and there is a huge hole between the bid and ask, that's unstable volatility. i.e. a problem. The 500 or even 1000 point intraday volatility in the DJIA is not a problem. It's usually orderly. FLASH CRASH = CRASH in a FLASH = CRASH in one second/30 seconds/60 seconds = unstable = pandemonium = panic Basically, the algos are flooding and attacking the market.
So if I am already in a Short position and the market crashes, as in a Flash Crash, then that is OK. But if I was trying to go into a Short position during the Flash Crash I could get an awful fill. I think I got it. Thank you.
You are thinking theoretically. The problem is you don't know which bids and asks are genuine/real. If you are in a short position and you have a flash crash, you could have a paper profit in one second and then have the paper profit wiped out in the next second. If you are trying to get short during the flash crash, you have no idea where you will get filled since you are dealing with a lot of fake bids and scared bids. Bottom line is pandemonium/chaos. It's extreme instability. Nobody is safe. You are welcome in advance.
Your more detailed explanation does solidify it more for me. I imagine that would/could cause short term ,or traders who open and close the same positions on the same day, a real problem. Thank you for taking the time to explain it more clearly for me.
IMO..It's all political because the direction was DOWN...if the "flash crash" was up, end of story...just another excuse to give the average American something to get upset about to distract them or whatever and for the media and politicians to reap the rewards...nothing new
I'm all for them cleaning up illegal trading activity because its ILLEGAL. I think too many firms have been taking advantage of the lack of enforcement against illegal activities.
im sure they have a big list of firms and traders. Too many traders of this new era loved to exploit rather than learn how the markets work.
Problem as I see it is the revolving door at the regulatory agency. Make the investigation go away and shred all evidence, retire collect your pension and become a advisor to GS for 7 figures. Now how valuable will these auditors be to GS and others with the knowledge and source code they will have obtained?