Clearly, the tax advantages of long-term gains are superior. But I feel that algorithmic trading, by its very nature, likely doesn't work well for long-term trades. Are these traders happy paying the ~32-40% tax on short-term gains? Why not write algorithms that let you forecast more long-term prices?
closed as off-topic by Chris W. Rea, littleadv, Ganesh Sittampalam♦, Victor, Noah Apr 10 '15 at 14:51
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Algorithmic trading essentially banks on the fact that a price will fluctuate in tiny amounts over short periods of time, meaning the volatility is high in that given time frame. As the time frame increases the efficiency of algorithmic trading decreases and proper investment strategies such as due diligence, stock screening, and technical analysis become the more efficient methods.
Algorithms become less effective as the time frame increases due to the smoothing effect of volatility over time. Writing an algorithm that could predict future long-term prices would be an impossible feat because as the time frame is scaled up there are far less price fluctuations and trends (volatility smooths out) and so there is little to no benchmark for the formulas.
An algorithm simply wouldn't make sense for a long-term position. A computer can't predict, say, the next quarter, an ousted CEO, a buyout, or anything else that could effect the price of the security, never mind the psychology behind it all. Vice versa, researching a company's fundamentals just to bank on a 0.25% daily swing would not be efficient.
Tax advantages or not, it is the most efficient methods that are preferred for a given time-scale of trading.