Posts tagged ‘trading systems’
The system closed the month of March with a modest gain (+2.5%). With the exception of a few days, most of the market’s movement continues to be in the gaps, with relatively narrow intraday ranges. Again and again the market gaps up/down and then just lays there. Everyone seems to be guarding their chips and waiting for the other guy to make the first move.
So why all the caution? My personal view is that the ever-looming Euro debt crisis has instilled quite a bit of fear into the markets and the retail investor (after loosing all of his home equity and most of his 401K) has run screaming, fleeing equities for the foreseeable future. Thus, what we seem to have now is a listless market comprised largely of HFT bots trading money back and forth. A zero sum game and a difficult environment for the retail day trader, to be sure.
In this TED talk, Yan Ohayon demystifies and shares his experience with algorithmic trading and its impact on markets, our lives, and everything in between.
“We examined 50-years of historical S&P 500 Index data and compared the actual tail risk frequency and magnitude to the expectations of a typical investor operating under modern portfolio theory. The difference between the two is surprising, and it suggests that investors have significantly underestimated tail risk frequency and severity”
Kevin Slavin’s TED talk on high-frequency trading. He shows how these complex computer programs determine: espionage tactics, stock prices, movie scripts, and architecture. And he warns that we are writing code we can’t understand, with implications we can’t control.
“The ‘flash crash’ of May 6th 2010 was the second largest point swing (1,010.14 points) and the biggest one-day point decline (998.5 points) in the history of the Dow Jones Industrial Average. For a few minutes, $1 trillion in market value vanished. In this paper, we argue that the ‘flash crash’ is the result of the new dynamics at play in the current market structure…”