Behind the market swoon


(Emma) #1

Although more relevant to traders than long term investors an interesting analysis of how computerised trading is affecting the markets. If you get caught behind the paywall just google ‘WSJ behind the swoon’ or on the iPhone stocks app.

https://www.wsj.com/articles/behind-the-market-swoon-the-herdlike-behavior-of-computerized-trading-11545785641

Some interesting bits:

Roughly 85% of all trading is on autopilot—controlled by machines, models, or passive investing formulas, creating an unprecedented trading herd that moves in unison and is blazingly fast.

One reason the dynamic might have changed: Many of the trading models use momentum as an input. When markets turn south, they’re programmed to sell. And if prices drop, many are programmed to sell even more.


(Emma) #2

And here’s a counter argument