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Your comment ignores the dimension of the market that is volume and only focuses on price. If you hold inventory, you might be able to sell one unit at $x, but

Your comment ignores the dimension of the market that is volume and only focuses on price. If you hold inventory, you might be able to sell one unit at $x, but the buyer willing to buy the next 99 units may only be willing to offer a lower price. The notion of a "market price" for a stock is misleading in the same way. Price represents consensus, but it is only the most shallow consensus, as many participants would not transact that price but would instead offer a worse price. Liquidity is the notion of how much the price for large volumes differs from the price for smaller ones. Liquidity is arguably the more important concept, and so artificially batching transactions into less frequent time slots reduces liquidity and thus increases risk. Circuit breakers, like many finance regulations, are intended to address the emotion-driven aspect of prices as perceived by humans, but should not be necessary as trading becomes more algorithmic and less superstitious. Circuit breakers are, in effect, a clove of garlic worn around the neck of animals who are better suited to cheering on football clubs than they are to executing abstract strategies.

baking 7y ago
> Circuit breakers, like many finance regulations, are intended to address the emotion-driven aspect of prices as perceived by humans, but should not be necessary as trading becomes more algorithmic and less superstitious. I was under the impression that algorithms were created by humans.
- resters 7y ago
  They are, but most exploit profit opportunities introduced into market prices by human actors. If humans were rational, there would be just as many people betting against stocks as betting on them. The idea that upward price movement is always good is also misleading. A price can be irrationally too high, so corrections are good. Most of the conventional wisdom (and typical lexicon) about markets is laden with superstition and bias.

baking 7y ago

> Circuit breakers, like many finance regulations, are intended to address the emotion-driven aspect of prices as perceived by humans, but should not be necessary as trading becomes more algorithmic and less superstitious. I was under the impression that algorithms were created by humans.

resters 7y ago
They are, but most exploit profit opportunities introduced into market prices by human actors. If humans were rational, there would be just as many people betting against stocks as betting on them. The idea that upward price movement is always good is also misleading. A price can be irrationally too high, so corrections are good. Most of the conventional wisdom (and typical lexicon) about markets is laden with superstition and bias.