Quote:
Originally Posted by MalcPow
Interesting. I thought most of these systems were essentially volume-based plays with a lot of stop order triggers that would definitely fire at good buying points if other indicators seemed fine. Learn something new every day.
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And what indicators look fine in that situation? What machine would be the first to bet against a storm like that?
Yes, these systems work both ways if that is what you are trying to say, but I'm doubtful they are designed to bet against a panic. If they are then those machines will end up losing a lot of money for their owners. This isn't conditions of normal operation, you need to have a machine that can recognize that even though every variable is sliding, that the 'real price' of the company is higher than the current bid. Which means its breaking out of the short term calculation these systems are based on.
I'm sure they have cutoffs and what not, but they are usually designed from the perspective of an individual machine. The problem is everyone has a machine, they react pretty close to the same time, so to make a market you get insane prices (see Accenture maybe... 4 cents on a $40 dollar stock???). Its a terrible design in my opinion, I'd be happy to discuss it in more detail of course. I'd be the first to admit many of the theoretical advantages such systems have and the math they are based on, but would be the last to admit they are healthy for the overall economy or are designed with all the macro-implications accounted for. My background is creating systems with lots of artificial agents and seeing the insane (and sometimes beautiful) behavior you can create with well intentioned and simple code on each single agent. The first thing I learned is the more complex the code on each individual gets, the harder it gets to predict the results.
Maybe if all the trade data was public and transparent we can do some data mining and see who won from that mess. To create that 'volume' someone had to sell a lot of shares at a low low price in the first place... that person probably lost. Unless of course they had their trade nullified by the Nasdaq exchange in their favor...