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Investors scared of the rise of quant trading

Investors scared of the rise of quant trading

First they can be scared b/c they fear what they don’t know

They are right. Extra leverage means extra risk in the market for extra juicing. Maybe I should find a new line of work

It seems algos are programmed with a bias to buy. Individual stocks have risen to ludicrous levels that leave rational humans scratching their heads. But since everything always goes up, and even small dips are big buying opportunities for these algos, machine learning teaches algos precisely that, and it becomes a self-propagating machine, until something trips a limit somewhere.

And suddenly things happen that weren’t part of the scenario. To deal with it, the machines, perhaps in lockstep, revert to a part of the code that says “sell.” Plunging markets trigger more sell signals, and so on. And in this paroxysm of selling by the machines, there might not be enough human traders left—they’ve been sent to pasture years ago—to jump in and buy. Sure, it cannot happen, we’re told. Until it does happen.

 

http://www.marketwatch.com/story/should-investors-be-worried-about-the-rise-of-the-quants-2017-05-23

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