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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:
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.
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.
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.
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.
When one door closes, another opens.
-- Cervantes, Don Quixote
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.
Like most, you are over thinking it. There are an endless number of AI and other "algos" playing markets. I don't really care "why" price moves, I just observe it.
Just find your setups, start a position small, manage risk, and exit with profit.
Yeah sometime's I say "algo's are kicking in" out of habit, but I don't really know if that's true. What I mean by that though is either A) I identified a trigger point which typically causes a sizable move or B) Just through experience seeing the price action I can tell something is up and about to trigger.
I agree with the other posters, not too concerned about if it's an actual algo kicking in, as long as what I am doing is repeatable and has an edge.
), so don't take my remarks too seriously.