5 ms·

Interesting article, and some really nifty graphs, but stay away from the comments section. More seriously, could someone with a bit of experience in this sort

by qwzybug 16y ago

Interesting article, and some really nifty graphs, but stay away from the comments section. More seriously, could someone with a bit of experience in this sort of thing speak to the actual import of these patterns? It's not entirely obvious whether or not there are shenanigans at work.

CamperBob 16y ago
Actually I thought the comments were the best part. ("It might turn out like the early experiments in making meth, it works until it blows the shed all to hell. These guys are playing in real markets. Imagine what mayhem they are doing in closed-system synthetic market models. What appears like the graphs above are what escapes from the lab!")
- Confusion 16y ago
  Well, the comments are extremely mixed. There are often a few good comments, but the majority varies from unnecessary to complete crap. Zerohedge has a lot of decent articles, but they are all gloomy, which attracts a lot of conspiracy theorists. Conversely, they also have some articles that could be considered fringe/crackpot. And the majority of commenters seems to be in the last group.
  - CamperBob 16y ago
    I remember listening to a bunch of kooky-sounding talk in 2005-2006 about asset bubbles, inverted yield curves, credit default swaps, mark-to-market accounting, and other arcana spoken of in incredulous, worrisome tones that sounded like rejected dialogue from The X Files. Then, pretty much everything they said was going to happen, happened, except for the usual wish-fulfillment subtexts about military coups, riots, and TEOTWAWKI. (Of course, I've heard the same sort of talk since the mid-1970s, so its predictive power isn't all that impressive...)
yummyfajitas 16y ago
In my opinion, this is almost certainly not shenanigans, but simply algorithms behaving in ways their creators did not expect. I believe this for several reasons: 1) If you wanted to deliberately manipulate the markets, you'd come up with something less obvious than this. You might even come up with a pattern that is non-periodic or even put a few calls to rand() into your code just to spice things up. 2) If you were doing anything in the markets on purpose, you'd try to be unpredictable. And by "unpredictable", I mean "hard for a human to look at a graph and guess at". Once you trade predictably, the other guy can exploit you. 3) I've come up with trading strategies myself that generate "crop circles" in simulation. It's never on purpose, and I'd certainly never be permitted to put such things into production. Sometimes algorithms behave in ways you didn't expect. For instance, you might compute a quantity f(t), place a buy order when f(t) > 0.5 and cancel it when f(t) < 0.5. If f(t) oscillates wildly from 0.4995 to 0.5001, you will wind up doing "quote stuffing" yourself. Of course, most of the time f(t) winds up oscillating from 0.631 to 0.632 or something like that, and things work normally. If your system is designed well, some monitoring system further down the line will prevent this. Not all systems are well designed.
- Confusion 16y ago
  but simply algorithms behaving in ways their creators did not expect That's possible, but if the owner of the algorithm doesn't monitor it or shut it down, someone should and the owner should be punished for the behavior of the algorithm. Currently, that doesn't seem to be happening, which means this becomes a pretty good excuse for letting your algorithm behave like this on purpose.
  - yummyfajitas 16y ago
    The owner should be punished? What for? Who is harmed by a visible "crop circle" in the trade data? Also, I don't understand why you think the owners would allow their algorithms to behave like this; a "crop circle" doesn't make money and it does expose you to risk. Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down. So while there may be crop circles out there, no one person is responsible for more than a few of them.

by qwzybug 16y ago

CamperBob 16y ago

Actually I thought the comments were the best part. ("It might turn out like the early experiments in making meth, it works until it blows the shed all to hell. These guys are playing in real markets. Imagine what mayhem they are doing in closed-system synthetic market models. What appears like the graphs above are what escapes from the lab!")

Confusion 16y ago
Well, the comments are extremely mixed. There are often a few good comments, but the majority varies from unnecessary to complete crap. Zerohedge has a lot of decent articles, but they are all gloomy, which attracts a lot of conspiracy theorists. Conversely, they also have some articles that could be considered fringe/crackpot. And the majority of commenters seems to be in the last group.
- CamperBob 16y ago
  I remember listening to a bunch of kooky-sounding talk in 2005-2006 about asset bubbles, inverted yield curves, credit default swaps, mark-to-market accounting, and other arcana spoken of in incredulous, worrisome tones that sounded like rejected dialogue from The X Files. Then, pretty much everything they said was going to happen, happened, except for the usual wish-fulfillment subtexts about military coups, riots, and TEOTWAWKI. (Of course, I've heard the same sort of talk since the mid-1970s, so its predictive power isn't all that impressive...)

yummyfajitas 16y ago

In my opinion, this is almost certainly not shenanigans, but simply algorithms behaving in ways their creators did not expect. I believe this for several reasons: 1) If you wanted to deliberately manipulate the markets, you'd come up with something less obvious than this. You might even come up with a pattern that is non-periodic or even put a few calls to rand() into your code just to spice things up. 2) If you were doing anything in the markets on purpose, you'd try to be unpredictable. And by "unpredictable", I mean "hard for a human to look at a graph and guess at". Once you trade predictably, the other guy can exploit you. 3) I've come up with trading strategies myself that generate "crop circles" in simulation. It's never on purpose, and I'd certainly never be permitted to put such things into production. Sometimes algorithms behave in ways you didn't expect. For instance, you might compute a quantity f(t), place a buy order when f(t) > 0.5 and cancel it when f(t) < 0.5. If f(t) oscillates wildly from 0.4995 to 0.5001, you will wind up doing "quote stuffing" yourself. Of course, most of the time f(t) winds up oscillating from 0.631 to 0.632 or something like that, and things work normally. If your system is designed well, some monitoring system further down the line will prevent this. Not all systems are well designed.

Confusion 16y ago
but simply algorithms behaving in ways their creators did not expect That's possible, but if the owner of the algorithm doesn't monitor it or shut it down, someone should and the owner should be punished for the behavior of the algorithm. Currently, that doesn't seem to be happening, which means this becomes a pretty good excuse for letting your algorithm behave like this on purpose.
- yummyfajitas 16y ago
  The owner should be punished? What for? Who is harmed by a visible "crop circle" in the trade data? Also, I don't understand why you think the owners would allow their algorithms to behave like this; a "crop circle" doesn't make money and it does expose you to risk. Incidentally, if your algorithm spams the exchanges too much (i.e., your fill rate goes way below 1%), your broker will shut you down. So while there may be crop circles out there, no one person is responsible for more than a few of them.