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 Post subject: High volume traders using algorithms
 Post Posted: Tue Aug 07, 2012 1:33 pm 
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Joined: Mon Apr 16, 2012 10:39 pm
Posts: 22
Just been listening to a trading podcast that raised a bit of concern. They talked about the increase in algorithms being used by high volume traders to skim off profits from individual traders. These algorithms scan millions of trades every second and detect patterns of high volume, they then place a high volume trade which spikes the price and activates stop losses, allowing them to take the profit.

One of these algorithms went wrong last week in America causing chaos on the markets. No wonder I have been having so much trouble trying to make a profit last week.


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 Post subject: Re: High volume traders using algorithms
 Post Posted: Thu Aug 09, 2012 1:07 pm 
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Joined: Wed Nov 03, 2010 9:10 pm
Posts: 147
I've heard similar stories but there are no real figures out there as to how much trading is actually algorithmic trading. It reminds me of may 2010 when the Flash crash happened. While the source of the flash crash has never been nailed down it's believed that it was a fat finger trade (someone adding and extra 0 to a trade by mistake) that caused it. This then set off all the algorithms selling like crazy causing the a massive crash only to recover minutes later.

I think the important thing to remember about these algorithms is that they are trying to replicate human behaviour. It's humans that still make trades that move the markets and the algorithms try to spot when/if a big move is coming and trade accordingly.

I don't think you have anything to worry about too much because if push comes to shove you are smarter than a machine. It's just a case of out smarting the other humans that are also playing the markets. Figure out how to do that and you'll be a rich man.

Thanks for the post moonie. It's an interesting subject that's for sure.

_________________
May the markets be with you!

Harry,
The Spread betting beginner


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 Post subject: Re: High volume traders using algorithms
 Post Posted: Thu Aug 09, 2012 2:15 pm 
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Joined: Mon Apr 16, 2012 10:39 pm
Posts: 22
Thanks Harry, I love trying to outwit machines. A good example is ebay; I was continually being outbid at the last moment when I realised it was computer software that was doing it. I now time the refresh rate and have a high bid ready to press go. When there is a couple of seconds left, I hit go and the bid goes in giving the software insufficient time to outbid me. Works every time.

Just need to find a similar technique for spreadbetting.

Moonie.


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