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Look to none other than Long Term Capital Management[1] back in the 90s to see how dangerous a game it is to either algorithmically predict or automate a thing
by muhfuhkuh 16y ago
Look to none other than Long Term Capital Management[1] back in the 90s to see how dangerous a game it is to either algorithmically predict or automate a thing as emotionally wrought and, at times, institutionally manipulated as the market.
[1] http://en.wikipedia.org/wiki/Long-Term_Capital_Management http://en.wikipedia.org/wiki/Long-Term_Capital_Management
- jrockway 16y agoWhat? Their time-tested bond arbitrage algorithms worked great. They beat the market month after month. Only when they tried speculating on equities did they fail. And even then, their positions only took short-term losses that they would have recovered from had they not been leveraged 100-to-1. Their algorithms were correct, but they didn't have enough capital to see their positions through to the end. The LTCM story is about greed and leverage, not algorithmic trading. Plenty of money can be made trying to beat the market: it pays the salaries of the hundreds of thousands of investment bank employees around the world. The problem is, you personally can't do the same things they do, because you don't have enough capital. Raise a billion dollars and your days of commuting to work are over.