Friday, July 29, 2011

How Algorithms Shape Our World

You may not agree with him.


coconut said...

haha, i can't stop laughing. nice.

coconut said...

absolutely agree, machines or humans, its still part of nature, chaos and unpredictable.

the market has never change its structure from the very beginning.

coconut said...

to borrow from stephen hawking again, "the boundary condition of the universe is that it has no boundary"

in market terms, "the structure of the financial market is that it has no structure", no structure to begin with.

in another words, there are no patterns, what we see is only our immagination, including trends.

coconut said...

better explain a little more otherwise i will be label as mad man.

immagin the mass of the universe is fliud like water, no structure no form, if you put them in a cup, it will be like a shape of a cup.

now put the market info and data into your brain, well to some it may look like head and shouder or trends.

so it is the structure of our brain that is shaping our market structure. but the true fact is that market has no structure, no form, no boundary.

Fat88Trader said...

Very Chim!

It's always a 50/50 chance that the market might go up or down but Algorithm with their processing power and speed can detect the heartbeat of the market with no emotion to their execution.

Those muscle power Algorithm can manipulate the market so easily and may never get caught.

It's not a level playing field and I believe more than 95% of the market participants lose money to these machines.

Trying very hard to stay within that 5%, it's tiring to compete with these machines that might be thousand time faster than human cam react.

Haha, only can pray that these machines malfunction once in a while.

Kerry Wilcock & Anna Tsang said...

yes, the malfunction has not hapeened in awhile, last year there was a big spike down bu 100 plus tic in SIMSCI , yummy

coconut said...

haha mulfunction,

i though of writing a bit on quantum mechanics and the "principle of uncertainty" but haha better not.

but it states that the probability of knowing something is less than 50% cos information will be lost due to quantum flatuation (around the black hole).

coconut said...

back to trading, the machines are base on certain system to trade, so as human.

speed work both ways, it can profit for them no doubt but it can also kill them in a flash, so good luck to the algos.

i don't know exactly how algo system works, but to me they are just queue cutter (cut queue). and for program trading, they have been with us since before i started to trade.

speed is what we should define our own trading system, trade longer term and we will see our trades in altra slow motion, no need to compete with the algos.

i'm also surprise you keep mention manipulate, i don't think anyone can manipulate the market for an extended period of time, otherwise, this markets will only left with manipulators.

thats only my opinion.

coconut said...

by the way, the "mulfunction" of the machines are actually not mulfuntioning. its a natural cause of event that as long as they are present, it will happen again.

actually without them it will still happen may be at a slower speed.

coconut said...

exploration of algo trading is similar to the discovery of quantum mechanics in science.

both used mathematics fomular to predict the outcome of certain event on a micro level, and both involve with physics and rally understood by most (including me).

quantum mechanics leads to wonderful discovery of many things in life including computers but it also created the atomic bomb!

i guess the algo system will also eventually leads to the creation of mother of all crashes in financial markets.

Fat88Trader said...

I believe there are insider trading, those caught are just the tip of the iceberg.

I believe there are short term manipulation in the market, someone who have privy information not known to people like you and me. We are far way to low to know what's happening on top. It's always a grey area.

Look at the leaders around us, with their miserable salary how come they are so rich especially their children. No Corruption?

Same as in the market place, it's difficult to catch them.

coconut said...

ok, its a same old story, when there is a new invention or new ideas, it is always label as unconventional, bad, witch, and sometime evil.

it will takes a long time for people to get use to it. i understand the frustration for not knowing.

people who interested in theory like quantum mechanics are label as nuts even though much of it can be proven in experiment. people can't just accept it. "what? we can go through a wall? nuts" but the theory only determents its probability of that happening at a sub-atomic level which is true.

even with the knowledge of "relativity" and "quantum mechanics", the scientist will never able to unify these theory in a single formula to explain the working of universe. much like a trader try to unify trend and counter trend in a single system for trading. they are just incompatable.

ok where are we haha, the function of the universe and the market place are beyond what our digital mind can understand, it cannot be explain in mathermatic formula as far as our mind is concern, meaning, the market is unpredictable.

i read a recent news about a trader who been accuse of manipulation of stocks of capital mall trust and its warrants, that guy was only trying to arbitrate and make a little profit for his company. and he was pinalise for it. what a joke!

ok i better stop.

coconut said...

ya, forget to conclude,

so we need not worry about algo trading and the large institution. they too like us, will never able to predict the market.

coconut said...

wah lau! so many crap (borrow from SMOL). my conclusion is not conclusive enough.

what relativity and quantum theory got to do with trading? absolutely nothing!

so we need not worry about it.
and we need not need to know about relativity theory or the quantum machanics or other physic, they are just ideas i fit into trading.

tiger woods need not need to know about golf physic, he start young and he practice and practice a lot.

in trading, we need to think of ideas and transform into trading system and practice and adjusting.

cos trading is an art, never a science.

Singapore Man of Leisure said...


You very interesting! LOL!

I got you when you talk about water and cup - I have a bit of Zen training so can catch up.

But lost you when talk about atom bomb... I never studied Quantum Mechanics :(

For a brief moment in time, self-esteem went down a notch...

But heng ah! Feel much better now when you say Trading is an art. I still got hope. If not, how to compete with the MBAs and PHDs?

Justice Trader said...

Damn interesting, can't stop laughing either.

coconut said...

we know how atomic bomb works right, they split the nuclus of the atom and create a change reaction and release the power of just a hand full of stuff.

well these algos orders are like the atomic particles just waiting to be colided with other orders that cause a change reaction, release a hugh enegy that we call financial meltdown.

speed (not size) is the culprit.

coconut said...

can i earn a PHD for what i wrote? please! haha.

coconut said...

on the market front, we all know about the dead lines, what will the market react comes next week?

even the pro i think are confuse, me too. my port are flat (with positions) and prepare to follow whatever market tells me and i'm suppose to be long the stock market.

this time whether my position is long, short or flat, i feel really uneasy. the feeling of being trap (which is bad) and no way to go.

any opinion (about the market) out there? haha.

coconut said...

ok! after pondering for 2 days, i'm not going to place any orders before the market open. first time since i traded stocks!

coconut said...

nothing happen, they truck the deal as expected.

so back to bombs haha, let say you are an expert in all kinds of bombs. you wear protecting gear and complicated instrument to test bombs.

one day while walking down the road, you spoted a special kind of bombs you have not encounter, it looks colorful and dangerous. what will you do?

if i'm the expert i will stay clear from the blast zone and let some other expert to handle it. simple as that.

coconut said...

so after go round the world and back to the same spot, we have to realised that just like we enter the atomic age (quantum) during last century with fear of end of the world, now we are facing the "algo age" and how traders should handle it i rest my case.

coconut said...

i always associate songs with trades cos i listen to them all day long. my son (who is now a drummer) use to ask me to stop playing cos he dislike oldies, but i told him this is part of my job, so be quite.

this is a big hit in the 60s and was sing all over the world.

coconut said...

i'm not buying yet! still flat.

Bala C said...


Looking forward to your posts!
Quite sometime already!!!