I've been reading this "Retail order flow is dumb money" stuff for years. I am a retail trader and yet rather than getting easy fills as dumb money all my stock orders get a big flashing radioactive sign on them. If I put in a buy order at the bid, rather than fill me the "dumb money" buyer, the bid price goes up 1 or 2 cents. And on trying to sell the offer price goes down 1 or 2 cents. I use 3 different brokers with 3 different clearing operations and the same crap happens with all 3 of them. Why bother paying for my "dumb money" order flow if you are going to do everything but fill my orders? This is why I despise trading stocks and prefer futures where this penny nonsense and price improvement crap can't happen. What I want to know is who are these "dumb money" retail trader that are worth paying for and that get their orders filled? Are they only those people stupid enough to use market orders? Or is there some secret society I have to join to get my orders filled before I yank them?
Well this is just the other part of the fun out there. HFT/MM entities trying to force price insensitivity. Just because it's dumb money doesn't mean you're going to get a "great deal."
The answer is simple. Read carefully. What they want is a big fat batch of retail to CHERRY PICK So if they don't like your order they don't fill it.
Why not just do what you need to do to get in or out? Buy at the ask, and sell at the bid. Someone wants to buy your position, then just sell them what they are offering. So what if the price is a tic or two below your profit target?. At LEAST you'll probably get out.
Doesn't quite work that way. The size of the offer is often split among the numerous exchanges. Hence if you see 1000 shares on the offer and you try to lift it, you may only get filled on 50 or 100 shares. The HFTs raise their orders on the other venues and only fill your balance when they can scalp out against it at a profit. The other game, is if you pay through the offer. let's assume they route to an exchange where there are 50 shares on the offer even though the NBBO shows 1000 shares. You get your 50, the HFTs raise their offers and now the order flow purchaser has not NBBO obligations and can abuse you in any number of ways. In fact, they may event give you a little price improvement on the 50 shares so they can say they gave price improvement before sticking their large knife in your back.
No brokerage fees trading for stocks already exists in the U.S. at robinhood dot com. Next, they'll have IRA accounts, bring it to options trading, have a trading api, etc. etc.