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can someone who works in quant/HFT/market making help me understand whether the following is correct?
(assuming there is only a single exchange for simplicity,) order execution is hard because (a) the order book is of finite size, so placing a large order induces slippage, and (b) if you make a series of trades spaced far apart to wait for more liquidity to show up, the value of the stock can move, (c) if you make a series of trades predictably, then HFTs can fuck you over by clearing out the order book 1ms before you buy and turning around to sell to you.
so unavoidably you have to make a series of trades. you need to trade off between speed of executing on everything and the liquidity available. the HFTs can only fuck you over if they know exactly when you're going to trade, because they bleed money whenever they mispredict and try to frontrun an order that doesn't exist. you also want some way to hedge the possible price movements.
Naive use of limit orders will cause you to lose the profitable trades, and fill the unprofitable ones. There are ways around this, but it's not trivial.
I work in quant trading, but not specifically in order execution. These are all real concerns. Which ones are most important depends heavily on your strategy and market, e.g. if your positions last for days order execution is a lot easier than if they last for minutes. And time-based slippage might be big or small relative to tick size.
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This isn't quite true, sophisticated funds can exploit almost any predictability.
1[anonymous]
Let's say I'm a market maker. Assuming there's no way for me to hedge my position when my quote is taken, how do I get out of my position when someone hit my quote?
The standard way to do this is to "lean" on your position. If my estimated price of something is $100 and someone bought against me, then I'll adjust my estimated price to something like $101. The more position I'm holding right now, the more I adjust. When the adjusted price moves too far away from my quotes, I pull my quote back. That's why when you trade against market makers, you might get a worse price for your next order.