A High Frequency Trader's Apologia, Part 1
What I don't understand about HFT is why its efficiency does not seem to be limited by transaction fees.  I've tried a bit in the past to play with some algorithms that buy and sell (on paper) and it seems like the faster you go, the more you need the market to move in order to scrape a few pennies of profit, because the movement has to be sufficient to cover the spread, the transaction fees, _and_ provide some profit.  Of course with a simple example like "buy at $20, sell at $20.10", it seems simple enough to extract some profit, but in fact it would need to be enough profit that it covers the transaction fees, which seem to be a kind "friction" that limits the smallest change in price that is useful.  From what I can tell this kind of movement just doesn't generally occur in the sub-millisecond time frame, so how does it work?  Or is it just that they are trading so much $$ in one shot that a very tiny change in price covers the transaction fee without issue? (Meaning they are taking very large risks..)