ALL THINGS BIG AND SMALL 2.0

BioComp System's Dakota Swarm Intelligence In Action I don't usually post articles on financial markets in this blog, since I have a special purpose Blog for it at http://www.technifundamentals.com/ . But the great number of advertisements in the local papers claiming to be able to make you rich quick in Forex, Stocks, Futures, Options and other derivatives prompted this post. Small investors may not know it. But for short-term trading, the odds are against them when competing with the Big Boys in the market. For the individual house-wife, retiree and wannabe traders who think that using technical analysis charting is sufficient, they will find it interesting to have a glimpse of machine-controlled high frequency trading supported by tools far beyond their understanding and financial means. I have been fortunate enough to have a glimpse of such tools although these tools are incompatible with my risk profile, my character and mental make-up. This post shows the reader three e...

Two years ago, I made the acquaintance of a high-frequency algorithmic trader, and was invited to view his operations: In a small, darkened room a few doors away from our office in Princeton, NJ, three traders sat hunched over large multiple-screen computers. Colorful charts writhed across the screens like snakes, and numbers flashed and scrolled, updating in milliseconds. Just recently, such secretive operations were brought into the limelight with the arrest of the Goldman Sachs engineer who stole the codes for an algorithmic strategy. The public is now aware that at least 50 % of the trades on Exchanges across the world are algorithmically driven. That is, no humans are involved as trades are executed at the speed of 500-1000 trades per second. And large blocks of shares are broken up, bought or sold in split seconds to avoid detection. The machines send out probes and gather information to enable them to profit from statistical arbitrage i.e. differences in Bid and Ask of as small...