High-frequency trading takes a great amount of effort and quick reflexes for it to work out to your advantage:
- Take a look at how mutual funds trade during after-hours trading. Mutual funds are different in that they can only be traded after the market closes at 4 pm Eastern Time. When a mutual fund trades, the trade is fully executed at whatever the next asset value might be.
- Check on the stocks that have the biggest volume changes during the after-hours period. A stock screener can help you review those changes and identify what stocks are in those mutual funds. Sometimes those stocks might be in one industry; these include green energy stocks or consumer goods and staples stocks all in one mutual fund. In many cases, multiple sets might be included because they are used to keep the risk of delving into only one industry.
- Take a note of all the individual stocks involved. See how those stocks might have dropped in value. Most mutual funds put in equal totals into each of the stocks added into a set.
- Get enough trades on those stocks ready as you can by following the drops. Keep those trades even in value if possible based on either total value or the number of shares involved with each one.
- Watch for how those trades might move. Most other people who trade this way might engage in short-trades that work for just a few minutes at a time. As the value changes, the stock might start to drop quickly.
- Finish the trade by getting out of it as soon as you notice it starting to decline.
High-frequency trading works to help people take advantage of sudden changes in the market. Getting out of the trade as soon as you start to notice it declining in value is vital to your success.
