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Dacryphile
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Posted - 2010.05.07 04:04:00 -
[1]
Edited by: Dacryphile on 07/05/2010 04:09:02 Using trading algorithms, they monitor all item's value changes, and buy and sell without any human interaction bringing profit to the owner of the software while they sit back and drink milkshakes.
They almost wrecked the Dow Jones today, dropping it 1,000 points in a few minutes sending the whole market into a panic.
I'm curious about MD's thoughts on these events.
Edit: Here is a pic of today's trading blip.
Originally by: Doc Robertson ...take a good look at this pic and tell us which one is you.
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Marshiro
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Posted - 2010.05.07 04:29:00 -
[2]
I wouldn't mind if I could get a piece of that quant action. Now that is market manipulation on the large scale :D
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Durente Galaica
Amarr Viziam
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Posted - 2010.05.07 05:05:00 -
[3]
Put your tin foil hats on fellas. Frankly, I don't believe this was accidental.
Why would the market recover so quickly? He sold, crashed the market, bought up the new stupidly low stocks, caused the rebound and will now retire tomorrow with billions.
He did his research. Obviously he was working with large enough amounts over a period of time to notice the behavior of his competitors. Studied the crash in 2008-2009, the market climate is currently on high alert and decided to cash in.
The super brains with no other passions and morals go into trading, because thatĘs where the money is. Is it so hard to believe someone would screw over everyone else to make a buck?
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Machete Visor
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Posted - 2010.05.07 05:31:00 -
[4]
Good article on the 0.01 ISK Game on the stock exchange...
http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading
Good overall trading site
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Dacryphile
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Posted - 2010.05.07 05:50:00 -
[5]
Originally by: Machete Visor Good article on the 0.01 ISK Game on the stock exchange...
http://www.zerohedge.com/article/day-market-almost-died-courtesy-high-frequency-trading
Good overall trading site
Great read, better than the watered down msnbc article. Linking it in the OP.
Originally by: Doc Robertson ...take a good look at this pic and tell us which one is you.
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Mme Pinkerton
United Engineering Services
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Posted - 2010.05.07 07:12:00 -
[6]
Edited by: Mme Pinkerton on 07/05/2010 07:14:32 I would be surprised if nobody had algorithms to detect these patterns (compare with slightly correlated markets to rule out "real" events as a cause of the disruption) and establish a floor by buying cheap. There's so much money to be made in such a situation that I wouldn't expect this to happen more than a few times before the market participants adapt.
Otherwise... game theory/negative externalities at work?
edit: also a great moment of opportunity for those who actually care about dividends
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Machete Visor
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Posted - 2010.05.07 07:24:00 -
[7]
Edited by: Machete Visor on 07/05/2010 07:25:11
Originally by: Mme Pinkerton Edited by: Mme Pinkerton on 07/05/2010 07:16:25
I would be surprised if nobody had algorithms to detect these patterns (compare with slightly correlated markets to rule out "real" events as a cause of the disruption) and establish a floor by buying cheap. There's so much money to be made in such a situation that I wouldn't expect this to happen more than a few times before the market participants adapt.
Otherwise... game theory/negative externalities at work?
Developing a 'fat tail' event algo would make sense.
The downside to that strategy is that NASDAQ reversed all the trades that occured at the now described 'bogus' prices (for example, google was down to $34 per share... from over $400 1 minute before). So the exchange will limit the impact of such a huge slide.
In this case, it seems like the volume that was put it far outweighed any realistic buying power the market could muster. I don't know the numbers we are talking about, but it sounds like someone tried to sell a huge block of P&G shares. To much for anyone to snap up in the 1 minute that it took to plunge...
Of course, the people that did buy at the bottom have had their trades reversed. And the selling firm (a wall street bank) ass has been saved by not having to cover the mistake trade.
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Mme Pinkerton
United Engineering Services
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Posted - 2010.05.07 07:32:00 -
[8]
... and it teaches us to be very careful with setting mechanistic stop-losses^^
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Akita T
Caldari Caldari Navy Volunteer Task Force
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Posted - 2010.05.07 07:33:00 -
[9]
Originally by: Dacryphile They almost wrecked the Dow Jones today, dropping it 1,000 points in a few minutes sending the whole market into a panic.
No, what almost wrecked the market was a stupid careless human entering a "b" instead of an "m", on top of either the same human having had disabled the warnings because he was too lazy to hit an extra "yes, I really want to trade that" or several other careless humans that failed to put in the proper code to catch such mistakes.
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Beginner's ISK making guide | Manufacturer's helper | All about reacting _
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Vaerah Vahrokha
Minmatar Vahrokh Consulting
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Posted - 2010.05.07 07:37:00 -
[10]
Quote:
I would be surprised if nobody had algorithms to detect these patterns (compare with slightly correlated markets to rule out "real" events as a cause of the disruption) and establish a floor by buying cheap
The technique (that I exposed days ago on this forum BTW) is used by market makers to make great cash and since a long time.
Example, stop loss trap (simplifying a lot):
- Quant software detects it's time of day to self-enable.
- Quant software analyzed historical data and determines we are past distribution phase and a new bullish trend is readying to form Elliot wawe #1
- Quant software can analyze orders (even in Forex, the software owner almost certainly has purchased a contract with visibility on raw orders).
- Being a market maker it *knows* where small traders stop loss orders are placed or can easily infer where they are placed at with so simple math that it can be done with a graph and a ruler (!) (this in response to MMe's support for insider trading ).
- Being a market maker and / or liquidity provider, a big sell order is placed that WILL make the trend spike down (reverse for bear market). The spike WILL catch the traders stop losses and will
a) Deprive them of money b) Kick them out of the current orders c) Therefore establish the market maker as temporary only player
- At this point and in a fraction of second - and still in automatic - the liquidity providing is activated and an hugely massive buy order is placed.
- Slower software and human operators at this point "see" the trend steeply rise and run to buy "before it's too late".
- At this point the quant software (or an human, the timing is not really critical now) dumps the buy order to the above and cashes in the free profit.
The same happens with take profit orders: the market maker makes the trend spike up so that the regular traders take profit thresolds trigger (expecially if it's their market maker, usually a big tier 1 broker) and those traders are all kicked out of the trade. Then - after few seconds - a massive order that will see the market maker alone in the middle of the action and the others forced to manually step in again (and pay the order commission again BTW, double bonus for market making brokers).
This lead to a dominance situation, where who pays the market maker is its prime victim. Hence the widespread hate for MMs. - Auditing & consulting
When looking for investors, please read http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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Machete Visor
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Posted - 2010.05.07 07:46:00 -
[11]
VV - Here is another nice strategy..
Market maker has a request from a client to buy 50 shares of IBM stock at $24 per share. Market maker knows there is a limit order out there to sell IBM shares, but it is 'hidden' because they dont post until the limit is met. Assume it is at 23.00.
Ordinarily, market maker (assuming he doesn't have IBM stock in inventory) posts a buy order for $24. Someone fills it, etc etc.
With an algo trading engine, market maker sends out a buy order at 23.99 for 1 share. No hits. Cancel. 23.98. No hits. Cancel. 23.97. No hits. Cancel. Etc etc etc. 23.00. DING DING DING! Hit 23.00 again for 49 shares. Sell 50 shares to client for profit of $1 per share. All this takes place in a millisecond.
Basically then I just hook my retail platform up to my algo trading engine. As my clients put in orders, I automatically do the search above and take the profits. Not a person to pay except the coder and the tech who keeps the box running. Thank you!
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Mme Pinkerton
United Engineering Services
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Posted - 2010.05.07 07:53:00 -
[12]
Edited by: Mme Pinkerton on 07/05/2010 07:55:45
Originally by: Vaerah Vahrokha This lead to a dominance situation, where who pays the market maker is its prime victim. Hence the widespread hate for MMs.
I think in that thread we were talking with slightly different scenarios/experiences in mind - I had the NYSE in mind (and basically described the traditional role of a NYSE specialist): if the market works all right there is no need for the MM to interfere (and iirc brokers are limited in the volume they are allowed to trade on their own to avoid scenarios of them manipulating a working market); but if the market is very slow and the standing orders are not realistically priced, you want to have a MM who offers to take your position into his books at a decent price.
and bringing this discussion back to EVE - adapt or die
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Vaerah Vahrokha
Minmatar Vahrokh Consulting
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Posted - 2010.05.07 08:06:00 -
[13]
Quote:
... and it teaches us to be very careful with setting mechanistic stop-losses^^
Stop losses AFAIK are a technicality.
For your stop to work there has to exist some conditions:
- the underlying platform has to react in real time. In case of "runs" this does not happen since everyone are slamming the connections at the same time. Results: varying delays, usually costing a capital.
- in some markets, someone HAS to have an opposite order so that your position can be closed. Of course during a run, people all want to leave ASAP and almost don't put in new orders. This means that the stop loss becomes just a wishful request.
This is why every decent broker suggests his customers to use multiple accounts so that his "working horse" can get margin called without losing everything he ever earned. Even then, in some markets there can be margin calls that don't get notified in time (again due to platform overload) and positions are not auto-liquidated quickly enough.
In this case, the broker will forcibly and demand by law for out-of-margin call additional and full coverage off the trader and this can really destroy someone's life.
Quote:
if the market works all right there is no need for the MM to interfere (and iirc brokers are limited in the volume they are allowed to trade on their own to avoid scenarios of them manipulating a working market
The market works (for Forex at least - it's the one I know better) for about 3 hours a day. The remaining 21, it's in a super-low-liquidity status and MMs DO interfere and liquidity providers (also used or are MMs themselves) DO interfere AND deleverage (that is, eat aka small traders aka leverage users alive).
Quote:
but if the market is very slow and the standing orders are not realistically priced, you want to have a MM who offers to take your position into his books at a decent price
MMs are only "accepted" because they are able to parcel-ize trading lots (100,000 euros = 1 lot) into a small size enough that low liquidity aka retail traders can manage. IE you will deal with mini (10,000) or even micro (1,000) lots instead of covering for a whole lot. But the benefit ends here, and it's why nowadays new brokers are advancing (ie request is big and raising) that have no dealing desk and let the orders "flow thru" the real actors (banks) without MMs.
Quote:
and bringing this discussion back to EVE - adapt or die
The problem is that in EvE your worst (ie compromised account) is to go down and poor till you need to restart mining. In RL, your worst is that a whole country or continent loses their retirement funds, their companies become worth a fraction, their money is crushed, their populace riots and people DIE.
This is how people adapt in RL. They don't go mine a roid, they go throw molotovs and kill innocents.
- Auditing & consulting
When looking for investors, please read http://tinyurl.com/n5ys4h + http://tinyurl.com/lrg4oz
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Mme Pinkerton
United Engineering Services
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Posted - 2010.05.07 08:39:00 -
[14]
Edited by: Mme Pinkerton on 07/05/2010 08:41:08
Originally by: Vaerah Vahrokha
Quote:
but if the market is very slow and the standing orders are not realistically priced, you want to have a MM who offers to take your position into his books at a decent price
MMs are only "accepted" because they are able to parcel-ize trading lots (100,000 euros = 1 lot) into a small size enough that low liquidity aka retail traders can manage. IE you will deal with mini (10,000) or even micro (1,000) lots instead of covering for a whole lot. But the benefit ends here, and it's why nowadays new brokers are advancing (ie request is big and raising) that have no dealing desk and let the orders "flow thru" the real actors (banks) without MMs.
We're derailing this thread (but then it's OT to MD anyways), so here my reply:
My initial post (in the other thread) addressed the scenario of starting an exchange in EVE; the trade volume at similar projects has been next to zero as far as i can remember and lot sizes are no problem at all. In this situation where you can expect to have 2-3 trades on a given item per fortnight, I think a dedicated MM would provide an awful lot of value to investors.
The first time I heard about liquidity providers/market makers/specialists was when talking to a bank which fills this role for about 1/4 - 1/3 of the trade volume in securities at the local exchange of a medium-sized city in Germany. I am certain that 99% of people living in that city have no idea that it actually has an exchange, the total trade volume is insignificant when compared to the likes of Frankfurt. But it still manages to attract enough investors to go on and this only works because they have MMs who are committed to provide the investors prices that are comparable to those on the larger trading platforms, no matter what the local supply/demand & trading volume looks like. The MMs are forced to provide orders for investment vehicles that are only traded a few times a month without being allowed to charge excessive margins - if they didn't exist the exchange would (probably) not attract enough customers to be viable.
That's the situation that is imho most comparable to EVE.
I think when talking about exchanges in EVE MMs would provide tremendous benefit (hopefully enough to get such a platform from the ground). I agree that it is easy for them to misuse their position and as trade volume increases the negative aspects become more obvious as the positive value dwindles but imho that's not the situation we currently have to fear in EVE ;).
As to the topic of insider trading: my primary interest in financial markets is them converting information, risk and uncertainty into easily manageable numbers. The more information in the market, the higher the medium-term accuracy of that number (short-term manipulations etc. can be filtered). As said before, I recognize that there is a conflict between attracting investors (who only have tiny tidbits of individual information) and having people with nearly perfect information in the market (who scare off the other investors).
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Claire Turing
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Posted - 2010.05.07 11:38:00 -
[15]
He accidentally the entire market. |
Galgacus
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Posted - 2010.05.07 12:59:00 -
[16]
ibt move to the relevant forum
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Graysson
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Posted - 2010.05.07 13:53:00 -
[17]
"Sky Net" is watching...
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CCP Shadow
C C P C C P Alliance
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Posted - 2010.05.07 16:58:00 -
[18]
Edited by: CCP Shadow on 07/05/2010 16:59:25 This discussion is largely about real world issues rather than being about EVE. I've moved this thread from Market Discussions to Out of Pod Experience.
Edit: Also removed off-topic posts. Carry on.
-- Shadow
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Pycke
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Posted - 2010.05.07 17:43:00 -
[19]
That goes to show even the most advanced algrithms can't predict the market.
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Surfin's PlunderBunny
Minmatar Anti Fundie Patrol
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Posted - 2010.05.07 18:31:00 -
[20]
Originally by: Pycke That goes to show even the most advanced algrithms can't predict the market.
Or they can and this was their plan all along!
Originally by: Xen Gin
Originally by: FOl2TY8
I know that some people like to have voluntary periods of abstinence.
Yeah, I use that excuse too.
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Zeba
Minmatar Honourable East India Trading Company
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Posted - 2010.05.07 18:35:00 -
[21]
Originally by: Surfin's PlunderBunny
Originally by: Pycke That goes to show even the most advanced algrithms can't predict the market.
Or they can and this was their plan all along!
Pretty much this. I'm sure the key players made billions on the fluctuations.
Originally by: CCP Zymurgist Get off the forums and go kill someone!
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Derovius Vaden
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Posted - 2010.05.07 19:49:00 -
[22]
Originally by: Durente Galaica Put your tin foil hats on fellas. Frankly, I don't believe this was accidental.
Why would the market recover so quickly? He sold, crashed the market, bought up the new stupidly low stocks, caused the rebound and will now retire tomorrow with billions.
He did his research. Obviously he was working with large enough amounts over a period of time to notice the behavior of his competitors. Studied the crash in 2008-2009, the market climate is currently on high alert and decided to cash in.
The super brains with no other passions and morals go into trading, because thatĘs where the money is. Is it so hard to believe someone would screw over everyone else to make a buck?
Because the market 'mods' hit the big red 'wtf' reset button.
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Wendat Huron
Stellar Solutions
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Posted - 2010.05.08 00:31:00 -
[23]
The market need to ban bots. Simple as that.
Delenda est achura. |
Kephael
Caldari SERENDIPITY INC R-I-P
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Posted - 2010.05.08 01:16:00 -
[24]
Edited by: Kephael on 08/05/2010 01:16:29 http://2.bp.blogspot.com/_wkgIzuqJM0w/S-Pew4u9PAI/AAAAAAAAEOo/o7vcRX2XGNg/s1600/ADVENTURES+OF+ROBOTRADER.jpg http://3.bp.blogspot.com/_wkgIzuqJM0w/S-Pa7CRtaNI/AAAAAAAAEOg/UWUcDQo35uo/s400/ROBO+FLOOR+TRADER.jpg __________________________________________
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Danton Marcellus
Nebula Rasa Holdings
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Posted - 2010.05.08 17:18:00 -
[25]
So this is how Skynet starts out.
Should/would/could have, HAVE you chav!
Also Known As |
Caldari Citizen20090217
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Posted - 2010.05.08 23:26:00 -
[26]
I *really* wish I understood this stuff, but I can't even make money on the eve market let alone irl where mistakes actually hurt. WTB economics skillbook.
Originally by: Wendat Huron The market need to ban bots. Simple as that.
Which will only lead to better bots. If online gaming has taught the world anything its that botting is impossible to stop if there is a benefit. Even if there was a 100% guranteed bot detector you would get the bot to output instructions and have a sweatshop guy input the numbers.
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