Have you ever read about high frequency trading? Here's an interesting article:
http://www.nytimes.com/2009/07/24/business/24trading.htmlApparently, what companies like Goldman Sachs do is to place orders, watch how the market reacts and cancel them if they go the wrong way within milliseconds. Only firms with super high bandwidth in close proximity to the exchange computers can take advantage of this effect. Brings a whole new meaning to speed trading.
I was thinking the other day how volatile the markets have become due to all of these automated mechanisms. Bear markets, often defined as a 20% drop in prices which used to last years, can now occur in minutes. Witness the 10% drop that happened on Thursday in just a couple minutes. The individual investor or trader clearly has no chance to compete against these automated systems. My advice is this: instead of trying to follow the trend (e.g. dumping your stocks when everyone else is trying to do the same thing), take advantage of these automated aberrations. A 10% drop in minutes is a great opportunity to buy some things, because you know they'll go back up. Bailing out Greece is much less significant that the entire economic bailout that happened in 2008. So that 10% drop becomes your 10% profit as you patiently wait for things to return to normal.
