Sunday, 17 February 2019

Where Are We in the Market

Technology has changed so many things, including the way we trade. Gone are the chalkboards and hand signs of yesteryear. Now we have instantaneous electronic trades and access to on-demand (and sometimes unverified) global news.

However, technology has also changed the market itself. The markets have always been continually changing, but with technology, the markets change faster and suddenly. Not only do the markets change due to local events but also due to global events, and even rumours of events. The changeability of the markets is one of the reasons why people have a hard time getting to CP and also why algos degrade so quickly. 
Politics have always affected the markets but now the markets are affected by global politics. Currently, we have a number of political events that impact the markets on a regular daily basis:
1. The slowdown in China, which might affect quarterly results of large                companies
2. Brexit, combined with the uncertainty in Europe 
3. Changes in U.S. trade policy
4. The start of the U.S. presidential elections with candidates being named
5. Tweets from high-powered individuals, such as Trump

There are have also been an increase in the so-called “hundred year” events. These are likely the results of climate change effects; stronger storms, hotter summers, longer winters, flash floods or droughts. Australia just lost over 300,000 cattle to floods. The U.S. has been gripped by an insane cold front that saw snow in the deserts and could impact the growing season. 

After almost 10 years of a one timeframe rising stock market, things have changed. More uncertainty leads to shorter trends and swings. The markets are very reactionary to the things I have listed above which means that in designing trading algorithms one must take that reactionism into account. Up until the end of 2016 we were intent on catching the pullbacks to the upward trend. This was classic 2009 ElectronicLocal stuff that you saw in this blog for many years. Now things have changed. 

The way to deal with the markets now is to assume that nothing lasts for long. Everything is in a state of change. The aim now is to either catch or fade the next move, a much more difficult endeavour.

That is where ELgorithmics can help. Automated algorithms are becoming the only way to keep up with the speed of trading and the changing trends. ELgorithmics do not degrade and use the latest market data so they keep current with the market trends, even when those trends change. Our ELgos may not be able to expect when a tweet or global event might shake the market, but they can react quickly to those changing events. 


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