What ideas, theories, or rules of thumb traders used to rely on are no longer true, or might not be true, in the age of computerized algorithmic trading? A lot of trading ideas are based on human psychology. Lets take elliott wave as an example; Basically it expects markets to follow a stand pattern of human behavior. A new trend starts tentatively , and then fades back a little. The trend starts again and runs strong for a while, and then some people take profits or just leave and it fades again. Finally it has another up surge as late comers enter or people still believe there is more left in the trend, and that runs until it finally dies out. As a model of human trading psychology it is probably correct more often than not. But computers don't have psychology. I did not write to have a debate about elliott theory. That is just an example. People say we have not had a significant pullback in the equities market in this current bull market. Maybe the way we think about markets has to change in the computer age. Maybe some of our ideas about moving averages or whatever are no longer as relevant as they once were and we might need to new ones. So what do people think is no longer true or relevant in a world of computerized algorithmic trading?
I wouldn't spend time developing algorithmic strategies that mimic human behavior.
Instead, the advantage of algo's is to do what humans cannot.
Due to time constraints, please do not PM me if your question can be resolved or answered on the forum.
Need help? 1) Stop changing things. No new indicators, charts, or methods. Be consistent with what is in front of you first. 2) Start a journal and post to it daily with the trades you made to show your strengths and weaknesses. 3) Set goals for yourself to reach daily. Make them about how you trade, not how much money you make. 4) Accept responsibility for your actions. Stop looking elsewhere to explain away poor performance. 5) Where to start as a trader? Watch this webinar and read this thread for hundreds of questions and answers. 6) Help using the forum? Watch this video to learn general tips on using the site.
If you want to support our community, become an Elite Member.
The following user says Thank You to Big Mike for this post:
I actually meant something a little different. Are there any ideas about trading that you might have had years ago, or might have been in a book written back then, that you discard now as being irrelevant or useless because the nature of trading has changed due to the influence of computerized algorithmic trading systems. Are long held ideas on how markets react wrong now. Should we throw away our old books and ideas?
The easy answer is to say everything is different. But that is probably not true either.
Indeed. When I look at data from the 1920's and read Richard Ney and most other books, nothing is different. Just stuff moves faster and if anything computer techniques are easier to spot. The big dogs still use the same capitulation tricks to empty the pockets of the herds once they've been corralled in corners by whatever cycle/wave/spiral of sentiment happens to be handy.
News is still cobblers, same as it it ever was (great Talking Heads track of course) and HFT - just added noise. Nowt new under the sun really.
The following user says Thank You to ratfink for this post: