The first spike is mostly machines

[Fairman]

The first spike is mostly machines

Within the first fraction of a second after a headline number, algorithms parse it and trade. Human reaction time is a quarter of a second at best, and the typical retail click takes much longer once the platform delay is added.

The first spike therefore reflects the algorithms' read of the number versus forecast. Because many use similar logic, the spike tends to be one-directional and large. Then humans arrive, and the market begins to think.

The implication for scalpers is clear. Any attempt to trade the first spike is a race against machines, which win.

The more interesting question is what comes after. Algorithms are often wrong about nuance. A headline that looks bullish may come with a downward revision to the previous figure. The market corrects within seconds or minutes.

Fading the spike works in some cases and fails in others. What makes it a poor strategy is the cost: the spread is at its widest, and fills are unpredictable.

A more reliable approach waits for the spike to complete, watches for a pause, and takes a measured entry in whichever direction the pause suggests.

What does the market do in the 30 seconds after the first spike, and has that been recorded across enough releases to see a pattern?