Does having greater dependence on computational algorithms make the market more rational?

[Zoetstofzoetje]

trades equal money; when on the ´receiving´ side of a trade, under most circumstances (e.g. ECN and stock price) you get a few pennies. Up to 23 cents per 100 at the moment, I believe. So it´s worth it, if you think can get out at the same price, halfway, or even a full penny with credits again. In other words, one tiny transaction could cash up to 1.46 dollars, asssuming no transaction costs (which the high volume guys get, or very close to zero).

[Kidlicious]

trades equal money; when on the ´receiving´ side of a trade, under most circumstances (e.g. ECN and stock price) you get a few pennies. Up to 23 cents per 100 at the moment, I believe. So it´s worth it, if you think can get out at the same price, halfway, or even a full penny with credits again. In other words, one tiny transaction could cash up to 1.46 dollars, asssuming no transaction costs (which the high volume guys get, or very close to zero).

This doesn't sound right. What about the losers? I know they are probably the small traders that don't have these programs, but how much can be skimmed from them? That amount isn't going to change (or do you believe it will for some reason?)

[Zoetstofzoetje]

in theory anyone can receive those so-called ´credits´. what happens is, the small-timers don´t know about them, and thus don´t receive them (the intermediary pockets this money instead). anyway, the small traders always get screwed in various ways, but they´re not aware of this.

it depends on your intermediary. small investors don't get good deals.

[Aeson]

If the markets were automated then all these stock traders would be released out into the wild. We really don't want this. They'd be on your lawn shouting about how much they want to pay for your lawn gnomes... they'd be ruffling through your drawers trying to figure out how many pairs of underwear you have to make sure they stock the shelves at Target properly... they wouldn't be able to afford cocaine or amphetamines and one whole sector of the economy would go under...

We need these guys there, doing what they do... so they aren't here, doing what they do...

[Dinner]

If you get enough money invested in being traded according to math equations then you get more market response to those equations. I'm not sure that means the market is being more logical; it all depends on how logically based the original equations are.

[Zoetstofzoetje]

consider this scenario: i was exchanging dollars for euros. i told my bank to do the foreign exchange transaction for me at market price.

next day, not only had the charged me transaction fees and 2.5% exchange fees (that, I expected), but they also claimed that the transaction had occurred EXACTLY at the time of day where I would get the worst exchange rate. so, for example, the price is 5 dollars for 1 euro during the entire day, except for 2 minutes, where it was being exchanged at 6 dollars per euro. imagine the odds!

if you want a good deal, find a better intermediary.

[Aeson]

Dude, that's harsh. I'd give you 1 euro for just 3 dollars!

[Zoetstofzoetje]

i'd tell you that's not a fair trade as the dollar is not really a stable currency, but wouldn't be able to give any alternatives at the moment...

[Kidlicious]

in theory anyone can receive those so-called ´credits´. what happens is, the small-timers don´t know about them, and thus don´t receive them (the intermediary pockets this money instead). anyway, the small traders always get screwed in various ways, but they´re not aware of this.

it depends on your intermediary. small investors don't get good deals.

I'm sure that what you're saying is true but doesn't really address my point. I'm saying that if you increased trades significantly on the macro level your return per trade will diminish. The total that can be made from trades is a constant. So if these programs merely increase trades there is no economic gain on the macro level.

[Aeson]

It's ok, I'm a very generous man and I don't mind the risk. Remember that I don't have any overhead the banks do. I don't have to have a building, deposits at the central bank, vault to keep the money, other vault to keep the souls of high level employees... we'll just use Paypal, ok?

[Kuciwalker]

trades equal money; when on the ´receiving´ side of a trade, under most circumstances (e.g. ECN and stock price) you get a few pennies. Up to 23 cents per 100 at the moment, I believe. So it´s worth it, if you think can get out at the same price, halfway, or even a full penny with credits again. In other words, one tiny transaction could cash up to 1.46 dollars, asssuming no transaction costs (which the high volume guys get, or very close to zero).

Oh my god, you're an idiot.

[Kuciwalker]

Zoewhoever somehow mangled bid-ask spreads into "you can make money off of just buying and selling at the same price".

[Zoetstofzoetje]

what you're missing is

A) who´s gaining and who´s losing? there´s a variety of different types of agents, each of which has different goals and methods. what is beneficial to one (e.g. more trades) is detrimental to another.
B) return per trade... who´s trade? what kind of return? which goal (e.g. long-term investment, short-term skimming, speculation, marketmaking, inside trading, etc)? anyway, there is not just one cake that is cut up, there are a variety, and if one cake grows another one shrinks. sometimes, new cakes are discovered. when they are, other cakes are destroyed.

[Zoetstofzoetje]

Oh my god, you're an idiot.

i might be, but at least i´m not suffering from positivist autism.

[Kidlicious]

what you're missing is

A) who´s gaining and who´s losing? there´s a variety of different types of agents, each of which has different goals and methods. what is beneficial to one (e.g. more trades) is detrimental to another.
B) return per trade... who´s trade? what kind of return? which goal (e.g. long-term investment, short-term skimming, speculation, marketmaking, inside trading, etc)? anyway, there is not just one cake that is cut up, there are a variety, and if one cake grows another one shrinks. sometimes, new cakes are discovered. when they are, other cakes are destroyed.

WT... You have no idea what I'm saying.