Algorithmic Trading
You might take this as a sign that a Terminator-style dystopia is just around the corner, but robots (or at least artificially intelligent agents) are alive and well on Wall Street. These devices work by a process called algorithmic trading.
An algorithm is just a formula. As in "when a stock gets to ___, start buying it. Stop buying it when it gets to ___ and hold it until it gets to ___, then sell."
Actually, you don't need to join the anti-Skynet resistance just yet. Until the computers achieve self-awareness and become sentient, there is still a place for people in algorithmic trading.
Computers have diminished the need for people yelling at each other on the floor of the stock exchanges. But they've also increased the need for computer programmers, who don't trade themselves, but figure out how the computers should trade. These nerds mine data to find patterns in market movements, and then design algorithms to take advantage of similar situations as they come up in real time.
Related or Semi-related Video
Finance: What is the Fast Market Rule?11 Views
Finance a la shmoop what is the fast market rule? okay things get crazy here [Two guys riding a rollercoaster]
whoa and every now and then there's a leap well blimey, that's how things work
here on the London Stock Exchange.....
the fast market rule accommodates the chaos by giving brokers and other market
makers the freedom to trade outside the ranges published to the exchange why is
this needed? well because we live in a world of robots and artificial
intelligence and fat thumbs that hit the wrong keys and hackers from Russia China
and Mars all of whom can profit from chaotic disruption if you want to see
this phenomenon in its finest form well check out Jack Nicholson in the original [Man stood next to Jack Nicholson as Joker]
Batman movie and that was the best one so the logic revolves around the fact
that today even with all our massive computing power we would still rather
rely on human beings when you know the congressman hits the fan then assume
that a computer will be clever enough to figure out what's wrong quickly you know
when the world is on a collision course with chaos all over the place fast [Meteor strikes Earth]
market rule, humans over robots...
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