Payment for order flow means that whoever is getting your orders (schwab/robinhood) is getting paid to send them to a specific market maker: https://www.citadelsecurities.com/
The Market maker is holding lots of securities that they want to sell. They also buy securities (to then sell.) They are trying to make money on the spread, meaning "buy low sell high". Market makers provide liquidity in that their whole goal is to not "invest" but to enable trading by being willing to buy and sell.
As for the actual execution of those trades, that's out of my depth, but someone else may be able to fill in the gap.
> Does that make me uninformed?
I don't think so, I think if you are trading on a strategy that competes with HFT approaches then you would be "uninformed" but to the "average" buy and hold or buy and sell in a few days, all of this shouldn't have a large impact on your bottom line, it should actually enable it.
In the technical, trading sense, retail order flow is all uninformed. One sense in which I understand the term is that what you're "informed" about is the next zillion shares in the position you're working to unload for the huge fund you work for, not whether you read the 10K.
I read the Bloomberg article. You should read it. Basically retail orders are sufficiently random to keep the HFT in the money vs <hush hush "front running" </hush hush> an institutional investor who breaks up their market order. That's it.
Payment for order flow means that whoever is getting your orders (schwab/robinhood) is getting paid to send them to a specific market maker: https://www.citadelsecurities.com/
The Market maker is holding lots of securities that they want to sell. They also buy securities (to then sell.) They are trying to make money on the spread, meaning "buy low sell high". Market makers provide liquidity in that their whole goal is to not "invest" but to enable trading by being willing to buy and sell.
As for the actual execution of those trades, that's out of my depth, but someone else may be able to fill in the gap.
> Does that make me uninformed?
I don't think so, I think if you are trading on a strategy that competes with HFT approaches then you would be "uninformed" but to the "average" buy and hold or buy and sell in a few days, all of this shouldn't have a large impact on your bottom line, it should actually enable it.