Are there any HFT dealers in penny stocks or small caps where some liquidity would be much needed?
False. There are long tail funds, I believe tradebot works on the long tail (among many others).
The thinly traded stocks have better spreads and less competition, which means there is money to be made.
Incidentally, most HFT firms stopped trading on may 6 due to a fear of broken orders. If you buy at 5, sell at 10, and the market goes up to 15, you could wind up losing $5 on a short position if your buy order is broken. Unfortunately, broken orders are impossible to predict algorithmically, since humans came up with the criteria for order breaks hours later.
False. There are long tail funds, I believe tradebot works on the long tail (among many others).
The thinly traded stocks have better spreads and less competition, which means there is money to be made.
Incidentally, most HFT firms stopped trading on may 6 due to a fear of broken orders. If you buy at 5, sell at 10, and the market goes up to 15, you could wind up losing $5 on a short position if your buy order is broken. Unfortunately, broken orders are impossible to predict algorithmically, since humans came up with the criteria for order breaks hours later.