?

Log in

No account? Create an account
Trading while drunk - Input Junkie
October 1st, 2012
07:51 am

[Link]

Previous Entry Share Next Entry
Trading while drunk
A broker trades while drunk and moves the price of oil as much as if there were a crisis.

Might it be possible to have "does this make any sense?" software? I'm not talking about something perfect, just a reasonable added filter to human or machine impulsiveness.

I've despised technical trading-- the belief that all the information is contained in the price-- for a very long time.

Link thanks to supergee.

This entry was posted at http://nancylebov.dreamwidth.org/551190.html. Comments are welcome here or there. comment count unavailable comments so far on that entry.

(5 comments | Leave a comment)

Comments
 
(Deleted comment)
[User Picture]
From:st_rev
Date:October 1st, 2012 04:41 pm (UTC)
(Link)
Futures trading makes economic planning more efficient, and makes prices and supplies of commodities more stable than they would be otherwise.

Case in point: for weird historical reasons, onion futures trading has been banned in the US since 1958. Onion prices in recent decades have been far more volatile than those of comparable commodities.

Futures contracts are basically a form of insurance. For example: an airline has a legitimate use for an oil futures contract. Oil prices make up a huge part of total airline expenses, and fluctuations in the market can have a potentially bankrupting impact on an airline's ledger. A futures contract allows an airline to lock in a price for a long period of time, and organize its operations accordingly. This constitutes a substantial positive economic benefit.

Note, also, that for the airline to buy such a contract, some other entity has to sell it. That's what investment banks are for, and properly run they provide an important service to the whole economy.
[User Picture]
From:pickledginger
Date:October 1st, 2012 02:25 pm (UTC)
(Link)
Wow. Forget airplanes, the bad guys should be learning to fly trading software.
[User Picture]
From:st_rev
Date:October 1st, 2012 05:07 pm (UTC)
(Link)
Might it be possible to have "does this make any sense?" software? I'm not talking about something perfect, just a reasonable added filter to human or machine impulsiveness.

You run into a recursion problem here: how do you tell if the "does this make any sense?" filter makes any sense? You have human judgement, and you have the best AI the humans can come up with, and that's all you have. In fact, a lot of concern these days seems to run the other way--how can we trust the programs, particularly the high-speed trading ones, without direct human oversight? There's no safe place to stand, no privileged wise governor.
[User Picture]
From:jsburbidge
Date:October 2nd, 2012 12:08 am (UTC)
(Link)
Most trading software I know of - and I write it, though for equities rather than futures - has some protections built in. However, these are based on evaluating single trades based on price, volume, risk, and current position. Evaluating a set of trades that moves the market is far more difficult, and the sort of risk/hedging logic that is used to deal with inventory traders is hard to apply to retail traders who place orders for customers (which is what this man seems to have been).
nancybuttons.com Powered by LiveJournal.com