More HFT

Here's a quote from a ZH article

"At least 60-70% of price changes are now due to self-generated activities rather than novel information." In other words, only about a third of commodity price moves are caused by real fundamental news now (as opposed to 75% pre-HFT)."

The article can be found here http://www.zerohedge.com/news/2013-03-21/hft-reality-70-price-moves-are-disconnected-fundamental-reality

So in theory... if 100% become self generated... Does that mean the market stands still? Not sarcasm, a genuine question.

Originally posted by TradeQueen

So in theory... if 100% become self generated... Does that mean the market stands still? Not sarcasm, a genuine question.

lol no, at 100% it would mean that all of the trades would be the computers fighting against each other. The article was just pointing out that the computers were stirring it up just to stir it up and there was no real fundamental reason behind the moves they created other than to exploit the market and then capitalize on it.

You do bring up a good question though. If the markets became 100% driven by HFTs will that mean and end technical analysis as we know it? TA is built upon human action, it is just basically a picture built on what traders are doing and that picture can be measured with diff tools and then extrapolations can be made, but how will computers act when they are pitted against one another based upon exploiting the weaknesses in another computers programming? Will the landscape completely change?

I mean that even though TA is based on converting action into pictures it still caused trading to change because people began to have faith in their tools. For illustration purposes lets take a Fibonacci level. Once the tool to draw these levels became popular and s few traders found that a certain lets even say obscure Fib level worked sometimes, did that change the market because people began to take trades there? And the more people taking trades caused it work more often causing more people to start using it.

So will this kind of genesis be created by computers as they become more utilized and are given more freedom in the trade making decision?

Lets look at a hypothetical: Lets take a strong support level on a chart. We know what that means now but what if a computer has found a means of manipulating the bid and ask (or some other way)at these levels to where they can blow right thru them then support levels would no longer have any relevance.

These are just some of the things I think about when my mind wanders.

Me too.. The topic sent my little pea brain into a loop. I started googling chess games... computer vs. computer... as if I have any extra time on my hands.

Hopefully we'll have enough variables in our crazy lifestyles to keep the machines from having that kind of standoffs.

I'll revisit this topic on another day... But that was fun.. THANKS!

Originally posted by myptofvu



These are just some of the things I think about when my mind wanders.