Comments on: Don’t Worry About Institutional Computers

By: LP

LP — Sun, 04 Nov 2007 20:33:36 +0000

Remember that Chess and Checkers have a finite number of moves. It could be in the millions. But take; stocks, options, forex, commodities & futures and then try creating a finite combination. Good luck.

So in some senses there will always be opportunities. And if there aren’t any, someone will create a new marketplace with new rules.

By: Worry About Your Neighbor’s Computer :: Move the Markets :: Entries ::

Worry About Your Neighbor’s Computer :: Move the Markets :: Entries :: — Sun, 04 Nov 2007 18:30:33 +0000

[...] know, when I wrote Friday’s article, I wasn’t planning at all to get into a discussion about artificial intelligence in trading. [...]

By: Richard

Richard — Sun, 04 Nov 2007 04:27:35 +0000

You are right, Tyro. Thanks for setting me straight.

By: Tyro

Tyro — Sun, 04 Nov 2007 02:57:43 +0000

Richard – Breakouts aren’t instantaneous and we already have stop and market orders so no, I don’t see how more speed will chalge things. Help me out and explain it to me. And yes, there is a limited number of shares that you can take without becoming the market. If you think that this means that computers with huge buying power have an advantage, presumably imagining that they’ll grab all the shares, you’re wrong. They’ll become the market and create their own tradable pattern of frontrunning them and selling into their move. If they wait for others and limit their size, they’re no different than trading against other traders (many of whom have far more leverage than they use). Huge buying power here is no different than someone placing a stop buy order for 50k shares which may take shares from some, but will probably screw the big trader when they can’t unload. Where’s the advantage which is meant to squeeze out the little guys?

Yes, some edges and patterns come and go, some will remain. Large computer systems may change some things but where one pattern stops, another must open. It’s the nature of the market as traders of different size, different interpretations, and different scales all interact. No different than today.

Sure, emotional control and pattern matching are elements of trading, of course. So? Put that together with something and tell me how you imagine that helps your case, ’cause I don’t know where you’re going.

As for your attacks on me and my trading, if that makes you feel better, go for it. I’m an easy target. But attacking me doesn’t change what I say, nor does it change the fact that your argument rests entirely on hand waving and innuendo. It’s yet another logical fallacy called an ad hominem and is generally the last resort of someone without evidence or argument.

By: Bass Ackward Trader

Bass Ackward Trader — Sat, 03 Nov 2007 21:24:47 +0000

i have found that most proponets of “R” are the same people that will tell u size doesn’t matter…if that makes u feel good about yourself, continue to believe the lie (about “R” that is)

By: Richard

Richard — Sat, 03 Nov 2007 21:21:16 +0000

I miss ‘R’ … does anyone want to tell me ‘R’ is pointless, and possibly then set their penis on fire?

By: Bass Ackward Trader

Bass Ackward Trader — Sat, 03 Nov 2007 21:12:46 +0000

i’m not a programmer, but i know one thing….as long as computers are programmed by humans, there will be different ideas on the correct path…as proof i offer up tyro, ugly, and richard

as long as prices move, humans will have an opportunity to make and lose money on their own

btw, news events trump technicals and any trading bot…as postitions are taken on and off as people (and i guess trading bots) process the new information, there will be opportunity

By: Richard

Richard — Sat, 03 Nov 2007 20:58:00 +0000

So, lemme get this straight… at the point of breakout, speed is not an issue, but liquidity is? Dude, put those two ideas together. The early bird is getting that worm, end of story. You can go on thinking “neither better nor worse” all you like, but unless you keep up with your competition, at some point you may realize you have brought a knife to a gunfight, so to speak.

Are you seriously saying your list of positive trader qualities would not include speed and pattern matching ability? Emotional control? Are you seriously saying that edges don’t disappear? You seem so sure of yourself, but last I checked you aren’t actually making any money. Consider the possibility that you don’t have all of this completely figured out. And, if you do, then why not take your own advice and make a living joining along institutional buyers, since it’s unimaginable that they could act without creating opportunities for you.

By: Tyro

Tyro — Sat, 03 Nov 2007 19:27:34 +0000

Ugly, yes, computers are able to replicate many behaviors of humans such as buying NR7 breakouts, but what exactly can they do better? Neither speed nor computational power are significant, and on these small timescales liquidity is an issue so buying power certainly isn’t an advantage (or the computer will become the market, creating opportunities). The bot becomes another player, neither better nor worse than any other and we all adjust just as we always adjust to the faceless traders every other day. Bots will not qualitatively change anything in this scenario.

Richard – many (most) traders earn their living by joining along institutional buyers, so I can’t imagine how they could become our enemy, even if they wanted to. How could a billion dollar fund act without creating opportunities for small traders? (They could leave the public exchanges to NYFIX Millennium or other dark books, but if their price is different, then arbs will make Millennium the same as any other ECN.)

Anyway, I think I’ve made my case and without details on the speculation, we’re not going to make any headway.

By: uglychart.com » Blog Archive » The Great AI & Trading Debate Continues

Sat, 03 Nov 2007 18:52:49 +0000

[...] nice discussion about AI and Trading has developed from Richard’s post and my reply. I agree 100% with this comment Richard just made in reply to Tyro: People said a [...]