BRN Trading short term, page-37

The manipulators never ever, ever, ever go away.

I was discussing manipulation with my son and he pointed out something about algorithmic automated trading that I had not appreciated but it is of course logical and is the subject of world wide debate amongst regulators behind closed doors.

When I was in my teenage years I read for the first time about car makers using wind tunnels to improve the aero dynamic efficiency of their vehicles to improve fuel economy. At the time I thought to myself that theoretically there would be one perfect aero dynamic shape and that over time all vehicles would come to be identical. This of course did not occur because of human intervention sacrificing aero dynamic efficiency for beauty and market differentiation.

This however is not something which has or will occur with the designers of algorithmic automated trading systems. They are not concerned with aesthetics but with optimal trading outcomes. So knowing that there are other algorithms operating in the market they are designed to take account of their existence.

So what occurs as my son pointed out to me is that every algorithm eventually learns what every other algorithm is doing and works with every other algorithm to achieve the same outcome. So if one algorithm detects another algorithm is buying or selling then it does not fight the other algorithm it joins in and when one of the algorithms for whatever reason turns the other algorithms that have joined in also turn.

The actions of the US human investors with GameStop is an example of how this works and as we know outraged the owners of the algorithms that do the same thing on a daily basis around the world.

The operators/owners of these algorithms can be on opposite sides of the country or the world and have never met and most likely do not even know the other operators/owners so from the regulators point of view there is none of the classical collusion that can be sanctioned by the law yet these algorithms are despite the appearance of being owned and operated independently become part of a giant cartel engaging in all of the practices which you and I as human traders would likely be imprisoned, fined and banned from trading for if we were discovered doing the same thing.

So as I suggested and Bacon Lover posted an ordinary retail shareholder has no chance on a daily, hourly basis of competing with these algorithms. They might get lucky from time to time but that is what it will be just luck.

Warren Buffet has told his family not to try and do what he does when he is gone and recommended ETF's. The only other way for an ordinary retail holder to succeed is by the long hold and ignoring the day to day movements of the share market. That is why it is important to do your own research digging deeply into the company you wish to put your hard earned into and keep abreast of this research ongoing until you decide it is time to no longer hold that company's shares.

It is not a matter of intelligence or ego ordinary retail cannot play successfully the short trading game against computers running algorithms to trade.

My opinion only DYOR
FF

AKIDA BALLISTA