Without the computers there would still be traders though. So you’d have to argue that more often than not the computers would create short term trends vastly different from the trends that human traders would. While this may be the case sometimes, I don’t think that it’s something that would have a major impact on non-day traders in most instances.
Therefore people think that things are not going to be as bad as they did a week ago. You think if a trader thought his algorithm made a trade he really didn’t want to make he wouldn’t reverse the trade, he would just say, “oh, well…I just bought a bunch of stock I didn’t want.”?
Need to think about that but generally speaking I wasn’t focused so much on day traders as I was the rest of the investor population. As an aside, vast majority of non-professional day traders lose money. But let’s say someone other than a professional daytrader wants to cash out $100k in mutual funds from his let’s say his 401k . He submits his request in the morning And then has to wait until the market closes and how he fared … was their a wild swing up - or down. Just one example of how computer trading cause volatility effects “people”. If it were not a problem it would not be such a hot topic on Wall Street. Everyone agrees there is a problem, but solutions are not easy to agree on. Hope not too many typos- on my small screen phone.
Yeah, if anything, algorithms efficiently shake down weak traders… they don’t devalue good companies or over value strong companies.
Hardly my favorite source for anything, but here you go…
I mean, unless you are dealing with crypto-currency, most companies don’t move up or down by a significant margin on a daily basis. The majority of times there’s significant movement on a stock is because of a major world event or a major event with that company. In such an event, there would be large fluctuations in the value even if it was mostly humans trading.
What most on Wall Street are worried about concerns the algorithms making human day traders obsolete and front running. To the average person with $100k invested in mutual funds, all of this means nothing.
I’m a programmer myself… during the crypto craze I experimented with writing a bot that would trade based on momentum swings. This was like a weekend project. I’m sure big firms hire Havard and MIT grads to create sophisticated algorithms that trade based on signals.
The things is… day traders do the same thing. They can’t crunch numbers as fast as computers, so they are less efficient than the computers at trading… but that doesn’t mean that humans wouldn’t make the same decisions if they could process information with the same efficiency.
I don’t believe this is true.
The nice thing is that algorithms can sometimes make technical chart trading more viable. Example: a bounce off 18k in the DOW was baked into the technicals. As was floating around 26k for a few days.
I agree @SneakySFDude. I would think companies would be doing worse considering the unemployment numbers.
But i also cant understand the huge drops when by and large nothing had fundamentally changed a few weeks ago.
Is the market a month ahead of the real economy? Workers are going to experience the unemployment pain for the next month or so, and then hopefully this pandemic subsides and hiring will begin?
Now now. We don’t discuss game theory here. Or the word game. Or the letter… oh forget it.
Oooh now you have done it. Next you are going to bring up 23k. And we are gonna have 1000 points about who said what when.
Funny. We’ll prob see 23k as a ceiling a little selloff once we hit it.
In my example I said if a person wanted to cash out $100k from his 401k … not that he had only $100k invested. On any given day dependent upon the computer trading generated swing, he has no idea until the market closes whether he will end up selling n shares or some factor of n. Do you know how many $ are in Mutual funds and are owned by “the people”?
Huh? Nobody can time the market. You can put in limit orders though. You don’t have to buy and sell with market orders. Put a limit in, turn off AON and sell as it hits crosses your limit.
Are you familiar at all with mutual funds?
Oh, and around $20 trillion invested to best of my recollection.
401ks aren’t mutual funds nor do they require mutual funds
Like growth is just put on holding pattern until this all blows away.
You are correct but it makes me think you really don’t know how/when mutual fund transactions are processed. Not a criticism, just an observation.
Most 401ks are invested in mutual funds. But there are also non-retirement related investors in Mutual funds. Buying/selling mutual funds is very different than individual stocks. Same for ETFs.
I thought the discussion was about 401ks but it must have been about mutual funds in 401ks. I never got inti mutual funds because they always seemed like a ripoff