How does an algorithm fator hints, leaks, statements, concesus and rumors. Discounting begins on price to varying degrees when the report or event may be weeks away. Then comes the event. The market decides if the previous discounting is proportionate to the event or if the event has met or failed to meet expectations relative to amount of discounting Price adjusts . Next.
Can algorithmic trading systems beat human traders?
- Thread starter Lloyd W. Coutee
- Start date
I wouldnt know. Is it more than "ringing a bell" where a trader then applies discretion or a mechanical system. I simply wonder if the text message is used as input to logic/conditions
and trading signals are output. Seems to fuzzy/variable .
EVENTUALLY machines and humans will be one. Where the edge will be then is much more difficult to say. I think that the always humorous efficient market theory will become much more real, and the full time trader a very rare circumstance. You need to be very rich and own all the best neural networks. Day trading is close to being obliviated, position trading will be 30 years away but not until we understand more about the human mind. At that point is where the silicon valley elite get scared, when the bots not only think and manipulate intuition and feelings but also control all the money. the money buys support....and politicians...and then the only way to stop is revolution. Which sounds like normal progress but the military and everything else will be in the digital age..... The old sic-fi movies still have it right. We need to re-write the future before it arrives.
News/rumor/twitter algos are a thing.
What are computers good at?
- speed
- identifying simple, persistent, patterns
- sticking to a plan
- getting their position scaling correct
- managing large portfolios
What are humans good at?
- processing complex, novel, information
- interpreting non quantifiable information
- genuine forecasting (rather than extrapolating the past, or assuming it will repeat) eg Paulson's CDS short, Soros
Which trading arenas are computers likely to be better at?
- HFT
- scalping (sure humans can do this, but you'd die of boredom, wouldn't you?)
- Systematic technical analysis
- equity neutral - where the portfolio is large but requires only quantifiable factors
- Stat arb
- passive index tracking, and 'smart' beta
- "vanilla" arbitrage or near arbitrage eg index vs constituents, on the run vs off the run treasuries
- any other strategy that boils down to smart or alternative beta, where a simple set of rules does the trick
Which trading arenas are humans likely to be better at?
- fundamental economic analysis, eg global macro type bets (Soros and Paulson again)
- subjective technical analysis (which, frankly, I am personally very skeptical of)
- weird, one-off, pure or near pure arbitrage trades (eg cash-CDS in 2009, French Gold linked bond in bonfire of the vanities...)
- special situations / event driven, eg merger arbitrage
- 'deep dive' stock analysis, on the long or short side, where you go right into the nitty gritty of the business
- activist investing (computers can't harass the board into doing what you want)
- anything where every trade is different and or relies on analysing a lot of non quantifiable information
(Note that the human edge in the later arena will be reduced or depleted if they don't have the discipline and the knowledge to set up their position sizing and management correctly and stick to it)
Did I miss anything?
At the risk of repeating myself from another thread:
- The very best human traders will always be better at trading than computers
- Most of us, including me, are not amongst the very best human traders.
GAT
- speed
- identifying simple, persistent, patterns
- sticking to a plan
- getting their position scaling correct
- managing large portfolios
What are humans good at?
- processing complex, novel, information
- interpreting non quantifiable information
- genuine forecasting (rather than extrapolating the past, or assuming it will repeat) eg Paulson's CDS short, Soros
Which trading arenas are computers likely to be better at?
- HFT
- scalping (sure humans can do this, but you'd die of boredom, wouldn't you?)
- Systematic technical analysis
- equity neutral - where the portfolio is large but requires only quantifiable factors
- Stat arb
- passive index tracking, and 'smart' beta
- "vanilla" arbitrage or near arbitrage eg index vs constituents, on the run vs off the run treasuries
- any other strategy that boils down to smart or alternative beta, where a simple set of rules does the trick
Which trading arenas are humans likely to be better at?
- fundamental economic analysis, eg global macro type bets (Soros and Paulson again)
- subjective technical analysis (which, frankly, I am personally very skeptical of)
- weird, one-off, pure or near pure arbitrage trades (eg cash-CDS in 2009, French Gold linked bond in bonfire of the vanities...)
- special situations / event driven, eg merger arbitrage
- 'deep dive' stock analysis, on the long or short side, where you go right into the nitty gritty of the business
- activist investing (computers can't harass the board into doing what you want)
- anything where every trade is different and or relies on analysing a lot of non quantifiable information
(Note that the human edge in the later arena will be reduced or depleted if they don't have the discipline and the knowledge to set up their position sizing and management correctly and stick to it)
Did I miss anything?
At the risk of repeating myself from another thread:
- The very best human traders will always be better at trading than computers
- Most of us, including me, are not amongst the very best human traders.
GAT