|
|
Why Markets are dangerously volatile.
12-06-2018, 06:56 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Sep 2012
Posts: 1,570
|
Why Markets are dangerously volatile.
https://www.cnbc.com/2018/12/06/mark...e-to-stay.html
Article blames machine driven algorithms for volatility, asks why SEC allows. Also blames passive investing for reducing liquidity.
I didn't know they got rid of the Uptick Rule. Bring it back by all means.
__________________
You know that suit they burying you in? Thar ain’t no pockets in that suit, boy.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
12-06-2018, 07:09 PM
|
#2
|
Thinks s/he gets paid by the post
Join Date: Nov 2015
Posts: 2,692
|
Machines also monitor news stories for keywords and initiate buy and sells. Put in a company name and word bankruptcy and things go crazy fast. Saw report on CNBC a while ago about this.happening on company stock that had quick sell off until a person stepped. The story wasn't about the company going bankrupt but one of their suppliers.
|
|
|
12-06-2018, 07:33 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
|
It seems that things like bringing back the uptick rule or tightening margin requirements are too logical for the markets/SEC to enact. The markets make money on volume so anything that slows trading down is not good for them.
Circuit Breakers
The market drops Tuesday and today were only about halfway to achieving a level 1 circuit breaker. I seem to recall this being used once, but I don't think anybody knows if this concept will actually work or it might make things worse.
https://personal.vanguard.com/us/con...reakersJSP.jsp
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
|
|
|
12-06-2018, 08:04 PM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 38,145
|
Quote:
Originally Posted by jazz4cash
It seems that things like bringing back the uptick rule or tightening margin requirements are too logical for the markets/SEC to enact. The markets make money on volume so anything that slows trading down is not good for them.
Circuit Breakers
The market drops Tuesday and today were only about halfway to achieving a level 1 circuit breaker. I seem to recall this being used once, but I don't think anybody knows if this concept will actually work or it might make things worse.
https://personal.vanguard.com/us/con...reakersJSP.jsp
|
I seem to remember going through a few circuit breakers in the 2000s.
__________________
Retired since summer 1999.
|
|
|
12-06-2018, 08:08 PM
|
#5
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
Quote:
Originally Posted by bobandsherry
Machines also monitor news stories for keywords and initiate buy and sells. Put in a company name and word bankruptcy and things go crazy fast. Saw report on CNBC a while ago about this.happening on company stock that had quick sell off until a person stepped. The story wasn't about the company going bankrupt but one of their suppliers.
|
Hmmm... Seems to me this would be an easy way for shortsellers to plant a story, then make beaucoup money.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
12-06-2018, 08:25 PM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
Here's an article on Bloomberg on the subject, although it requires a subscription and I can only guess through its title: "Biggest Worry for Traders? They Don't Know Why Stocks Are Moving".
If machines are buying/selling without a sound reason from fundamental economic changes, then I should be able to make money day trading doing the opposite.
After all, the only reason one should be afraid of buying is when the market goes down and stays down for a long time due to economic condition deteriorating. But if a market rout is due to stupid machines racing each other through the exit door, at some point, they will turn around and execute "buy, buy, buy".
Can it be so simple?
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
12-06-2018, 08:30 PM
|
#7
|
Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,731
|
Quote:
Originally Posted by NW-Bound
Here's an article on Bloomberg on the subject, although it requires a subscription and I can only guess through its title: "Biggest Worry for Traders? They Don't Know Why Stocks Are Moving".
If machines are buying/selling without a sound reason from fundamental economic changes, then I should be able to make money day trading doing the opposite.
After all, the only reason one should be afraid of buying is when the market goes down and stays down for a long time due to economic condition deteriorating. But if a market rout is due to stupid machines racing each other through the exit door, at some point, they will turn around and execute "buy, buy, buy".
Can it be so simple?
|
The people that own and program the machines are there to make money. And I am sure this is not a one time money grab by them.
__________________
*********Go Yankees!*********
|
|
|
12-06-2018, 08:34 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
Yes, they are in it to make money, but if you buy low/sell high, you are making money too. Oui?
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
Why Markets are dangerously volatile.
12-06-2018, 08:36 PM
|
#9
|
Recycles dryer sheets
Join Date: Mar 2016
Location: SoCal
Posts: 353
|
Why Markets are dangerously volatile.
I am a long term investor, I can’t beat computer generated trades or institution traders so just stick with long term goals investing in companies with strong earnings and it's working so far.
|
|
|
12-06-2018, 08:36 PM
|
#10
|
Moderator Emeritus
Join Date: Apr 2011
Location: Conroe, Texas
Posts: 18,731
|
Quote:
Originally Posted by NW-Bound
Yes, they are in it to make money, but if you buy low/sell high, you are making money too. Oui?
|
Exactly! Just follow the routine of the machine trades.
__________________
*********Go Yankees!*********
|
|
|
12-06-2018, 08:46 PM
|
#11
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2004
Location: Laurel, MD
Posts: 8,327
|
Quote:
Originally Posted by NW-Bound
Hmmm... Seems to me this would be an easy way for shortsellers to plant a story, then make beaucoup money.
|
I think that one of the main reasons that many are calling for reinstating the uptick rule.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
|
|
|
12-06-2018, 08:51 PM
|
#12
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
If most of the trades are being done by machines, then for every program that buys low/sells high, there's one that buys high/sells low.
Which machines do you say should be followed?
PS. Or perhaps the machines are simultaneously buying with one hand and selling with the other. They do this to confuse and scare the heck out of the humans?
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
12-06-2018, 09:09 PM
|
#13
|
Thinks s/he gets paid by the post
Join Date: Mar 2005
Location: yonder
Posts: 2,851
|
Quote:
Originally Posted by audreyh1
I seem to remember going through a few circuit breakers in the 2000s.
|
Wow! Not even circuit breakers can stop you!!!
__________________
When the people shall have nothing more to eat, they will eat the rich--philosopher Jean-Jacques Rousseau
|
|
|
12-06-2018, 10:12 PM
|
#14
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
High-voltage DC currents are not easily stopped.
I have linked videos of that, but here they are again. Instead of interrupting the circuit, you may create an arc welder right at the breaking contact point.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
12-06-2018, 11:16 PM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Mar 2005
Location: yonder
Posts: 2,851
|
Quote:
Originally Posted by NW-Bound
High-voltage DC currents are not easily stopped.
I have linked videos of that, but here they are again. Instead of interrupting the circuit, you may create an arc welder right at the breaking contact point.
|
Thanks. I watched both of the above videos. It's probably a prudent idea not to try to duplicate those experiments at home.
__________________
When the people shall have nothing more to eat, they will eat the rich--philosopher Jean-Jacques Rousseau
|
|
|
12-07-2018, 06:11 PM
|
#16
|
Moderator
Join Date: Oct 2010
Posts: 10,723
|
If a random delay on trades was implemented, the market would be more fair; some of these algorithms depend on millisecond accuracy and randomizing timing just a little would sideline these techniques that make the market jittery.
|
|
|
12-07-2018, 06:55 PM
|
#17
|
Recycles dryer sheets
Join Date: Jun 2018
Posts: 276
|
That circuit breaker is a good demonstration of V = L dI/dt
If you change a sizable amount of current (I) in a small amount of time (t) the voltage must increase across the wire (with inductance L)
You can get thousands of volts by rapidly interrupting a very large DC current being sustained by a relatively modest voltage source. This in turn ionizes the air across the broken connection and can in some cases re-establish current flow with a nice hot arc.
|
|
|
12-08-2018, 10:34 AM
|
#18
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2008
Posts: 35,712
|
It is more than that. The "V = L dI/dt" applies for interrupting an AC current too, unless you have an electronic switch that can turn off right at a zero crossing.
Yet, if we use the same common wall switch that is in every home to turn off a 120VDC circuit feeding the same incandescent lightbulb, the wall switch will burn up like the circuit breaker in the youtube demo.
What happens is that AC contact breaking creates an arc just like a DC circuit does. However, the arc tends to extinguish itself when the AC current reverses at the zero crossings. A DC arc can keep itself going.
The DC voltage that can sustain an arc depends on the current of the circuit. This is a subject in itself, but I have found that below about 80V the danger is reduced. That's why we do not have problems with car voltages at 12V, although the current through the starter is in the 100A's. Even aircraft voltage of 28VDC is still safe. Higher than that, and if you have an intermittent connection, it will burn a lot more readily than the same poor contact for the usual AC household voltage which is yet a lot higher.
In short, an arc can sustain itself at a much lower voltage and current in a DC circuit than in an AC circuit.
__________________
"Old age is the most unexpected of all things that happen to a man" -- Leon Trotsky (1879-1940)
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
|
|
|
12-08-2018, 11:06 AM
|
#19
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,723
|
I think the volatility is caused more by Geopolitical uncertainty rather than rising interest rates, which are not really high by any means. Yes the stock market has been spoilt over the years of next to zero rates, but it really cannot be maintained, and it knows it. It is well known that what the market fears most above all is uncertainty. It will probably be like this for another couple of years until things hopefully settle down. JMHO
__________________
"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
|
|
|
12-08-2018, 11:25 AM
|
#20
|
gone traveling
Join Date: Apr 2011
Posts: 3,375
|
When volatile, which times aren't markets dangerous?
|
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|