Interesting article, not sure what to make of it but here is a small sample of the link below: "Donovan thinks that the odd algorithms are just a way of introducing noise into the works. Other firms have to deal with that noise, but the originating entity can easily filter it out because they know what they did. Perhaps that gives them an advantage of some milliseconds. In the highly competitive and fast HFT world, where even one's physical proximity to a stock exchange matters, market players could be looking for any advantage. " http://www.theatlantic.com/science/...ts-the-tracks-of-bizarre-robot-traders/60829/
Create a pattern, wait for some other HFT shop to see it. Each time you do a particular pattern, you bump the stock a penny. Then once you see the other guy take the penny from you, you do the pattern once more and nail him for a dime. Trading can be a lot like poker.
pattern recognition has been very good for me, but now you have to guard against your past history of patterns being used against you as the data is filtered, and new algos are created to maximize profit with strategic buy and sell programs taking advantage of busting previous patterns.
A bizarre pattern has been found by a trading firm in the markets, and seems to serve no purpose. I am the only to think that High Frequency Trading is very damaging to our economies and effectively transform the markets into a giant poker table where only card counters make money? What about a new law where a huge tax is imposed if you do not keep your stocks for at least a week?
That´s not in anybody´s interest. A cancel / replace order ban of 30 seconds would help a lot...even 15 seconds would be enough. http://www.elitetrader.com/vb/showthread.php?threadid=204373
can somone clarify please? am i to understand that false bids and offers are fed into the system to give the impression of a price movement and effectively mis price a product so than they can benefit at someone elses expense. if this is the case this is illegal and against most exchange rules.
Not really, these patterns don't effect the price. They are too far away from the actual price and too quickly withdrawn...
It's not the stock market PER SE that does this. The most credible theory I have seen so far is one operator is adding noise to the transactions to gain an advantage over other operators, as he can filter his own noise out, thus gaining the millisecond advantage. It only show how any system CAN and WILL be exploited by people without moral values. Let it be the Soviet system or our stock market.
Market Data Firm Spots the Tracks of Bizarre Robot Traders here is details, But the algorithms we see at work here are different. They don't serve any function in the market. University of Pennsylvania finance professor, Michael Kearns, a specialist in algorithmic trading, called the patterns "curious," and noted that it wasn't immediately apparent what such order placement strategies might do.