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  1. #11
    mountain surfing nomadic's Avatar
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    There's definitely high frequency algos that deal with options.

    Thats a pretty weak argument to say volume contributes to volatility, and algos contribute to volume, so algos are the reason why markets are volatile. You have no justification of why algo trading has a different market impact than regular trading. Also, does the VIX depend on volume? Because earlier this year, the VIX index would be pretty high even though there was little trading volume.

    Also, S&P Cash index is calculated every minute, while S&P futures changes every moment. So naturally, if there is more volume on the S&P, there will be more differences with the Cash Index because they are calculated at different intervals and there is more trading intraminute. If S&P Cash Index was calculated every moment too, there would be much less differnces.

    Quote Originally Posted by LostInNerSpace View Post
    No. I'm sure such papers exist somewhere
    Well, the burden of proof is on your assertion.

  2. #12
    Senior Member LostInNerSpace's Avatar
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    Quote Originally Posted by Modern Nomad View Post
    There's definitely high frequency algos that deal with options.

    Thats a pretty weak argument to say volume contributes to volatility, and algos contribute to volume, so algos are the reason why markets are volatile. You have no justification of why algo trading has a different market impact than regular trading. Also, does the VIX depend on volume? Because earlier this year, the VIX index would be pretty high even though there was little trading volume.

    Also, S&P Cash index is calculated every minute, while S&P futures changes every moment. So naturally, if there is more volume on the S&P, there will be more differences with the Cash Index because they are calculated at different intervals and there is more trading intraminute. If S&P Cash Index was calculated every moment too, there would be much less differnces.



    Well, the burden of proof is on your assertion.
    You could be right about options. I've been out of the options market for a few years.

    I did not say volume creates volatility. I am saying constantly pulling a security in different directions at the same time creates volatility. What exactly do you think volatility is? More volatility means more players are placing opposing bets at the same time. When everyone agrees price moves in that directions, up or down. The more they agree the faster it moves.

  3. #13
    mountain surfing nomadic's Avatar
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    prices are volatile when there is no one on the other side of the trade. Lets say I own Lehman Brothers, and I want to sell at 100, no one wants to buy at 100. All the buyers are spooked, so they clear out and the only bid is at 80, whereas in normal times, the spread might be 20 cents. I have to sell bc for some reason, so I'll hit the 80 bid and take a huge loss. Thats the volatility, when the spread is huge. Not because of volume and narrow spreads.

    You're talking about ticks up and down, thats more flash order tracking. When the algos just seem to know how to trade against you even though you might have put in a hidden stop loss order. Thats Flash order reading. I am very firmly against that.

    Well, i guess I finally understand why u started this thread. lolz

  4. #14
    Senior Member LostInNerSpace's Avatar
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    That's not volatility. That's liquidity. But it can cause volatility in a liquidity crisis, like one we had in and around August last year.

    Quote Originally Posted by Modern Nomad View Post
    Well, i guess I finally understand why u started this thread. lolz
    Probably not.

  5. #15
    mountain surfing nomadic's Avatar
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    Quote Originally Posted by LostInNerSpace View Post
    That's not volatility. That's liquidity. But it can cause volatility in a liquidity crisis, like one we had in and around August last year.
    Dude. Its too painful for me to continue. good luck with watever ur trying to do.

  6. #16
    Babylon Candle Venom's Avatar
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    Quote Originally Posted by LostInNerSpace View Post
    I did not say volume creates volatility. I am saying constantly pulling a security in different directions at the same time creates volatility.
    1. So, in your opinion, a better market has less people pulling a security in different directions? (how is this different from just demanding that there be less people trading? ModNomad already provided the example of spreads, which you said wasnt what you meant, so im at a loss for how your definition of volatility is independent of # of people)

    2. i think you should try a general explanation in one post. complete with definitions, your reasons for them, why the status quo is bad, and why your solution would be different in practice and therefore results.

  7. #17
    Senior Member LostInNerSpace's Avatar
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    Quote Originally Posted by Babylon Candle View Post
    1. So, in your opinion, a better market has less people pulling a security in different directions? (how is this different from just demanding that there be less people trading? ModNomad already provided the example of spreads, which you said wasnt what you meant, so im at a loss for how your definition of volatility is independent of # of people)
    Buyers meeting sellers, sellers meeting buyers is what the markets are all about.

    At what point does a strategy or behavior do more harm than good? Think CDO market. Everyone thought it was perfectly acceptable until it all went south. I'm not saying algorithmic trading will blow up the markets. What's more likely is smaller traders and investors will get pushed out of certain markets.

    The level of volatility in the markets now is not so bad. Where it is headed does not look good. You would have to try trading to know what I am talking about. You would also need a little experience to know what trading in a well behaved market is like verse trading in a volatile market.

    Quote Originally Posted by Babylon Candle View Post
    1
    2. i think you should try a general explanation in one post. complete with definitions, your reasons for them, why the status quo is bad, and why your solution would be different in practice and therefore results.
    I really did not intend for it to go on so long.

  8. #18
    Senior Member Willfrey's Avatar
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    From what I understand about it computers are being used to detect market trends and make many, many relatively small trades that overall nets the trader quite a bit of money. I believe the critics take issue with the fact that there are great sums of money to be made over a short period of time without adding any real value to the market.
    ...Then I ducked my head and the lights went out, and two guns blazed in the dark;
    And a woman screamed, and the lights went up, and two men lay stiff and stark...

  9. #19
    Senior Member LostInNerSpace's Avatar
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    Quote Originally Posted by Willfrey View Post
    From what I understand about it computers are being used to detect market trends and make many, many relatively small trades that overall nets the trader quite a bit of money. I believe the critics take issue with the fact that there are great sums of money to be made over a short period of time without adding any real value to the market.
    Some critics take issue with that. I'm not concerned with people making a lot of money. I want to do that myself, responsibly. America is a capitalist society. I want to make a lot of money without destroying the environment, whether it is the natural environment or the environment in the market place. I am more concerned about the health of the market and maintaining an even playing field. Not everyone cares about doing it responsibly.

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