Algorithm stock market

Computerized algorithms are quickly replacing single-stock analysts and investors, leading to big changes in the way the stock market will value companies and increasing the chance that software glitches or hack attacks will jeopardize market stability.

Technological forces—including high-frequency trading, an explosion in exchange-traded funds and the proliferation of free information via social media—are behind this seismic shift, according to Nicholas Colas of ConvergEx Group.

It seems a stretch to think so.

Kevin Slavin: How algorithms shape our world | TED Talk | wunesajoc.web.fc2.com

In other words, we've come a long way from the days of the Buttonwood tree and Benjamin Graham. Computers and decimalization have chipped away at the ranks of human traders in the past decade.

Now, smarter machines are taking aim at the very people who analyze a company's merits and who make buying and selling decisions based on that analysis. They see passive, ETF-style investing as the new normal. On top of that, layer algorithms executing trades in milliseconds based on complicated fundamental and technical models, and simply front-running people before the human eye can read company or government news releases.

This kind of trading accounts for up to 70 percent of volume on some days with the full support of exchanges, which allow the purveyors of this trading to have their servers to be located right next to theirs so the high speed action can take place.

Stock Picking By Algorithms | Seeking Alpha

Some investors are already throwing up their hands at what they see as a market that is so detached from fundamentals and simply based on computers owned by hedge funds pinging each other back and forth. Earlier this month, The Associated Press' Twitter account was hacked. The anonymous group sent a message styled pricing lookback options and dynamic guarantees a headline that there had been two explosions at the White House.

It sent markets reeling for four minutes as some traders say algorithms picked up on the tweet first, or at the very least they started to instantly sell when the market ticked lower. This follows the so-called flash crash in May that sent the Dow Jones Industrial Average down 1, points wordpress call to undefined function update_option() a matter of moments.

The cause of that event is still stock exchange brokers kenya totally known, but high-frequency trading certainly played a part, most say. It isn't just machines killing the analyst star. Social media has made keeping information behind a paywall for investment banks virtually impossible. It's also created a community of analysts on Twitter and other social networks many of them former professionals giving away their analysis for free.

That could be the happy ending to this story. After a rough transition period, social media eventually reinvigorates fundamental analysis amongst the people, allowing anyone with a computer to capture big followings and become the Peter Lynch of tomorrow.

Using Genetic Algorithms To Forecast Financial Markets

Under this scenario, capital will be guided to its most efficient place through the ultimate free marketplace where the information playing field is level between participants. But this assumes there will be enough homegrown analysts and retail traders to outweigh the incredible boom in electronic trading on Wall Street. This algorithm stock market be an optimistic view. For the best market insight, catch " Fast Money " at 5 p.

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