Q Larry Tabb: I pretty much agree. Algorithmic trading doesnât necessarily lead to larger positions and bigger risk exposures, but they can accumulate faster and do damage more quickly. UQ
That is the statement to give to a person that thinks they know what there doing before they really go learn about that stuff first. It really would lead to a person's demise faster if they didn't know all the surrounding knowledge to go with technology of that sort.
Q The Cost of Algorithmic Trading: A First Look at Comparative Performance http://www.itginc.com/research/whitepapers/domowitz/AlgorithmicTrading_2.24.2005.pdf UQ
You'll still need humans to program these "Black Boxes" so I don't think they'll ever replace humans completely. "Black Boxes" ultimately fail due to markets changing from year to year.
I'm a bit confused of the point you're trying to make, but from what I've read of that pdf so far it still stated the glamours of its uses. But also the two viewpoints that are shared about it. VWAP, TWAP, and even icebergs have deminished there use since the mainstream has attained knowledge of them. Although they are still highly effective strategies they have their limitations. The real point of note you should take of an algorithmic trade is that you can define your own strategy. Not that you can take a canned stragey and expect it to work just because you thought it should. The whole fact that you can use a computer to determine every facet associated with market behavior is the real use of such things. COLD LOGIC what you're suppose to be using as you trade anyway. The only problem most will run into to do so is that THEY DON'T KNOW HOW or what they should do to make a computer as useful as it can be.... Vizion