{"id":1049,"date":"2009-06-14T10:52:20","date_gmt":"2009-06-14T15:52:20","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=1049"},"modified":"2013-04-03T13:32:45","modified_gmt":"2013-04-03T17:32:45","slug":"algorithmic-programs-that-will-be-eliminated","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/algorithmic-programs-that-will-be-eliminated","title":{"rendered":"Algorithmic Programs That Will Be Eliminated"},"content":{"rendered":"

Yesterday I wrote about secondary plays, and a program we call Buying the New Low. When a stock makes a new intraday low algorithmic programs buy this new low because they know that short term traders will get short. These programs are betting that only light volume will enter the market when a stock makes a new low. They buy the new low, tick higher and force the weaker short term shorts to cover. Basically they make pennies on many who are hitting the new lows in stocks. Let’s discuss why this program, particularly below significant technical levels has not worked, will never work, and will be eliminated by the market.<\/p>\n

I just want to say one thing about the dopey quants who employ this specific program: you are going to harm your firm. This program has not, cannot, and will not work. You need to take this program and toss it out with your left-over pizza boxes from Friday (for the retail traders: trading firms bring in pizza for traders on Fridays). And let me be clear, I am only writing about this one program, when stocks have broken very significant support levels. And obviously we have a great deal of respect for the brilliant quant traders who run profitable ingenious algorithms.<\/p>\n

One, it took us about a second to decode. Two, you can’t play games like this below important levels. What are you going to do if a huge institutional order for millions of shares enters the market and you are caught long two hundred thousands shares as a SAC Capital or Fidelity hits the crap out of the stock for five points? Because a stock below a secondary price can cause panic selling.<\/p>\n

What exactly is going through those brilliant mathematical minds of yours? Did they teach you this at algorithmic trading camp? Do you have so little regard for the market that you will disobey fundamental trading rules to make a few pennies?<\/p>\n

Didn’t firms like yours lose enough money when you tried these tricks when the subprime mortgage mess first hit? Your firms or firms like yours were decimated because you tried to get long very weak stocks when they made new intraday lows and force short term traders to cover (think CFC… oops). For those at home the programs bought the new intraday lows in the CFC’s because they knew short term traders would get short. The programs would buy and then quickly tick higher trying to force the short term day trader to cover. This did not work. Large institutional orders flooded the market. When the programs tried to uptick the large institutional orders whacked some more of their bids and went low offer. The programs were forced to scramble and get out of their short term positions. These programs recognized tremendous losses. These programs eventually were shut off by their firms.<\/p>\n

Didn’t you, your friends, or quants like you lose enough money when you tried this nonsense next with the financials? The financials made new intraday lows and you turned on the same dopey program. That didn’t exactly work did it in GS, MER, LEH, BAC, AIG.? Again, oops.<\/p>\n

I know a lot of traders who cannot trade against algorithmic programs and have been forced out of short term trading. All it takes is some effort and thought to learn how to trade against them. There are things we teach<\/a> to combat the programs. And I personally don’t have a problem with programs trying to make spreads and quick money. I do have a problem with quants who have such a fundamental disregard for the risk of buying stocks that are technically broken. I do have a lack of respect for strategies that disobey very basic fundamental trading principles such as buying stocks below significant support levels. I do take issue with quants who keep trying failed techniques.<\/p>\n

To the quants above, I understand that your math skills are genius. But superior math skills absent trading skills will not be rewarded by the market place. You are like an annoying nat that requires nothing more than some bug spray. You are like that guy everyone can’t stand on their pick-up basketball team. You shoot every time down the court. You score a ton of points and your team with more talent loses. And then you think you have had a good game. Develop a new program or the market will eliminate you.<\/p>\n

Nixed the trip to AC yesterday and instead ran in a race to raise money for Rider Women’s Athletics. So basically I tried to keep up with present and former DI athletes in a 5k. That kind of hurt. Ran the 5k in 24 minutes, which is not bad for someone who is five years past his prime and spends 12 hours a day sitting in a chair. It was a great event.<\/p>\n

Don’t forget to follow us on Twitter!<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Yesterday I wrote about secondary plays, and a program we call Buying the New Low. When a stock makes a new intraday low algorithmic programs buy this new low because they know that short term traders will get short. These programs are betting that only light volume will enter the market when a stock makes a new low. They buy … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10],"tags":[313,4676,18,301],"class_list":["post-1049","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-mike-bellafiore-bellas-blogs","tag-algorithmic-programs","tag-day-trading","tag-smb-capital","tag-trading-blog","no-post-thumbnail"],"yoast_head":"\nAlgorithmic Programs That Will Be Eliminated | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/algorithmic-programs-that-will-be-eliminated\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Algorithmic Programs That Will Be Eliminated | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Yesterday I wrote about secondary plays, and a program we call Buying the New Low. 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