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Watching for "algo behavior"?


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Watching for "algo behavior"?

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  #1 (permalink)
 Fiftyghosts 
Austin, texas usa
 
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I've seen / heard people (not here) make reference to "watching for algo behavior", seeing "the algos kick in", etc. Is there a way to determine that this is happening aside from increased volume? Are there 'rhythms' to it, or something somewhat concrete that one can look out for? Or.. is it jive?

Thank you!

Edit:

I found this last night, which is a solid entry point for what I'm looking for. I figure there are dozens of services that offer similar algos to big money / funds:

https://equity.natixis.com/netis/accueil/documents/Algorithmic_Trading.pdf

This one doesn't have as much info, but I haven't had time to dig further into it:

https://www.thetradenews.com/guide/bank-of-america-merrill-lynch-4/

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  #2 (permalink)
zzzz2021
Toronto Canada
 
 
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Fiftyghosts View Post
I've seen / heard people (not here) make reference to "watching for algo behavior", seeing "the algos kick in", etc. Is there a way to determine that this is happening aside from increased volume? Are there 'rhythms' to it, or something somewhat concrete that one can look out for? Or.. is it jive?

Thank you!

I'd say yes to Futures instruments and it takes a lot of efforts to observe price action so you can figure out why algos get triggered in those specific conditions.

Please note it has nothing to do with "volume" at all, though increasing volume can be considered as a bonus sign.

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  #3 (permalink)
 Fiftyghosts 
Austin, texas usa
 
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zzzz2021 View Post
I'd say yes to Futures instruments and it takes a lot of efforts to observe price action so you can figure out why algos get triggered in those specific conditions.

Please note it has nothing to do with "volume" at all, though increasing volume can be considered as a bonus sign.

Thank you for your response!

I'm trying to figure out how to apply this to both futures and equities. Of all of the communities I lurk, this is the one I think will be able to give me the most insight, you all are very conscientious traders.

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  #4 (permalink)
zzzz2021
Toronto Canada
 
 
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Fiftyghosts View Post
Thank you for your response!

I'm trying to figure out how to apply this to both futures and equities. Of all of the communities I lurk, this is the one I think will be able to give me the most insight, you all are very conscientious traders.

Your main challenges are:

a) how do you configure your charts so you are able to see algos in action in those specific conditions repeating each day;

b) realize when and why those specific conditions are duds. One specific example I can give you is when price action trades sideways.

Above statements only apply to Futures instruments. I've no clue about equities related 'cuz I don't trade stocks.

GOOD LUCK!

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Mozart2112
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I'd like to add that algos are written with those specific conditions in mind and use the same principles of technical analysis and strategies... to get in the market prior to bots or understand the why, you would have to learn more about the top strategies algos are written for like mean reversion, momentum, trend or reversal, etc... as far as spotting them in action I agree with zzzz2021 and observing price action and I would add ranges in those conditions. This should work in both futures and stocks.

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 bobwest 
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Fiftyghosts View Post
I've seen / heard people (not here) make reference to "watching for algo behavior", seeing "the algos kick in", etc. Is there a way to determine that this is happening aside from increased volume? Are there 'rhythms' to it, or something somewhat concrete that one can look out for? Or.. is it jive?

Probably jive.

Not to throw cold water on your question (well, not much anyway), but I sincerely doubt that anyone who tells you they can detect "when algos kick in" actually knows how to do this. Certainly algos make up a large part of total trading volume and it would be very useful if a person could know what they are doing. But actually knowing it is another thing. Probably sudden increases in activity have something to do with it, but making this or anything else a reliable guide to trading may not be all that easy or reliable.

Also, it is my impression that the true high-volume algos, the high frequency traders, are attempting to exploit very small inefficiencies in pricing that occur and disappear within milliseconds, which is why they trade in and out so fast. I do not think that they use, or care about, the types of analysis or trading methods that non-algo traders imagine they do. I do not think they are looking at charts for technical analysis patterns or whatever. We have had a few true HFT's who post here sometimes who tend to be dismissive of or unconcerned with the typical discretionary trader's methods.

As to whether there is a source or a service that can tell you how to track them, consider that they keep their trading methods very confidential, since they make their money by taking very small profits again and again, and don't really want it to be very easy to figure them out. I think that most or likely all of those who say they "know" when "the algos kick in" don't actually know at all. But since you can sell something even if it doesn't work, there will be those who say they do. (And for all I know, they might, of course. I would just not be quick to put much faith in their knowledge.)

There is more than one type of algorithmic trading, and I don't really know that much about any of it ( ), so don't take my remarks too seriously.

But I do think that if it were all that easy to track what they are doing, someone who had that knowledge would be trading on it and getting rich, not providing it to others, generally for money. As is often the case in trading, some things are too good to be true.

Bob.

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  #7 (permalink)
zzzz2021
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Mozart2112 View Post
I'd like to add that algos are written with those specific conditions in mind and use the same principles of technical analysis and strategies... to get in the market prior to bots or understand the why, you would have to learn more about the top strategies algos are written for like mean reversion, momentum, trend or reversal, etc... as far as spotting them in action I agree with zzzz2021 and observing price action and I would add ranges in those conditions. This should work in both futures and stocks.

Don't forget that algos react to news more than 70% of time. So while observing PAs, one also has to pay attention to daily news like this event list for today and understand why and how different type of algos get triggered.

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