agip wrote:
Bad Wigins wrote:
and who set up the machines to act like that?
fair enough
but much of it is simply momentum trading, not based on any sort of fundamentals.
So the fundamental attractiveness of bonds or stocks doesn' t matter much. it's not a matter of 'liking' securities...the programs have found that you can make money betting on momentum, so they sell when things are going down and buy when things are going up. Makes for some exaggerated moves in both directions.
The stock market is the result of the output of thousands of algorithms like this operating at a high speed - there's a reason it's considered a stochastic process.
As for who writes them, it's a combination of people ranging from PhDs in math and physics to absolute retards who vigorously claimed a year ago that we'd have no more than 2600 COVID-19 cases.
The end result of all these inputs and mixtures of outputs is more or less the same - a highly stochastic process. As to what kind of stochastic process that may be, well, that might be up for grabs. "Momentum trading" isn't much of thing either, at least at the big league level. That would be essentially claiming that your dependent variables are equivalent to your independent variables - essentially nothing more than circular causal loop.
Some traders can also take advantage of moments when the market becomes non-stochastic, as in the case of extreme volatility. Stat arbitrage through signal processing is supposedly how John Simon built his Medallion Fund.