Big directional moves occur when there's a significant imbalance between buyers and sellers.
Now we're talking and on the same wavelength
When a trader goes long there's only one thing that will make that trade profitable and that's an increase in demand over supply, that is the exploitation at work. So a trader is trying to exploit that potential future demand/supply imbalance. Exploiting is just one way to describe what's going on, other words and phrases can be used.
This is where the perversity comes in. The famous 7th Law states that dramatic price movements tend to unfold from price structures that minimise participation. If you can find those areas on the chart that is where good price moves tend to happen because of the imbalances of orders caused by the minimisation of participation. Therefore in my mind those areas are where the majority of market participants are in trouble one way or the other (they're either short and need to cover, flat and need to buy, or long but not long enough). That to me is the exploitation of other traders.
Now, back to Algos.
Yes, they're big.
Yes, they're only going to get bigger.
Yes, they're good because much of it is electronic market making and market makers are always a credit to any market.
Yes, they're a threat to many human traders.
But no, Algos are not a threat to anyone who builds a well thought out trading strategy based on the 7th Law. That Law isn't going to stop working any time soon because it's all about perversity and perversity is what the markets and trading are all about. So until an Algo can understand the concept of perversity, which they probably won't be able to in anyone's lifetime, don't worry about them.
