<a href="http:&#x2F;&#x2F;www.tradeworx.com&#x2F;media&#x2F;pdf&#x2F;TWX-SEC-2010.pdf" rel="nofollow">http:&#x2F;&#x2F;www.tradeworx.com&#x2F;media&#x2F;pdf&#x2F;TWX-SEC-2010.pdf</a> (p.13) and <a href="https:&#x2F;&#x2F;mechanicalmarkets.files.wordpress.com&#x2F;2015&#x2F;01&#x2F;toa-exchangesummary-13661.png" rel="nofollow">https:&#x2F;&#x2F;mechanicalmarkets.files.wordpress.com&#x2F;2015&#x2F;01&#x2F;toa-ex...</a> back up my claim that limit orders lose the spread on average net of costs. In a competitive equilibrium, this has to be the case. If the average limit order lost less than the spread and rebate, it would be profitable to mechanically copy every limit order with an infinitesimally small limit order placed right behind it. If the average limit order lost more, it would be profitable to copy every marketable order trading to remove any residual liquidity on the book at that price. Of course HFTs limit orders perform better than average or they&#x27;d be out of business (and many do go out of business).<p>FWIW, every successful HFT trader I know does this type of &quot;market analysis&quot; driven trading backed by very fast execution. Speed alone is no longer an edge in most markets. Most are holding risk for more than microseconds or single seconds. Trade direction is auto-correlated in short timescales so even being front of the line you are unlikely to buy and sell to earn the spread so quickly.