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To: Arec Barrwin

As is the dog track to the lower class, so is the stock market to the middle class.

Computer trading is operating on a different place in the stock market.

Happy gambling, suckers.


14 posted on 01/03/2011 10:42:09 AM PST by GladesGuru (In a society predicated upon freedom, it is essential to examine principles,)
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To: GladesGuru

Here’s a little more technical discussion of the problems with algorithmic trading. All such systems, no matter the math used, are really looking at varying orders of the derivatives (the slopes, and slopes of slopes) of different data. When there are only a few computers in te system, this is all well and fine because they don’t influence te entire system. But when a certain critical point is reached, trading on the mathematical derivatives becomes a positive feedback loop.

Now you can try and game this problem with some kind of neural nets, but you always end up evolving towards the same positive feedback situation.

In thermodynamic terms, you can’t get something for nothing. Once everyone has as much information as the system holds, then there is no more advantage to be had and the extra information you think you are getting is actually disinformation. This is also why you don’t generally see more than cubic splines in curve fitting, after that point the equations work only at the data points but divurge elsewhere .


15 posted on 01/03/2011 11:40:32 AM PST by DaxtonBrown (HARRY: Money Mob & Influence (See my Expose on Reid on amazon.com written by me!))
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