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Our Prices are now Manipulated with Algorithms!

July 12, 2017

 

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It’s time to wake-up, folks, to a new technology which creates most of our daily prices and also manipulates price discovery for our markets. The word is ‘algorithm’. Now that computers trade all our markets (mostly) this new invention for creating our prices is the ‘algorithm’. What happens is that a special agent called a Quant will program a trader’s computer with a source code and then this code (set of instructions) within an algorithm trades our markets. Algorithmic trading is now ubiquitous and most of our resources (energy, commodities, stocks, and futures) can and are traded with the help of algorithms.

High Frequency Computer Trading and Algorithms can use a ‘source code’ to trade in microseconds and the counterparty to the trade is another Algorithm. This type of trading (also called machine trading or automated trading) is becoming the default method for trading and creating changes in our daily electronic prices. Today, our Central Banks have trading computers which can also change our cyber prices using automated trading algorithms. This is because our markets are now electronic and machine driven. The human aspect to trading is being transferred to the computer and an ‘algorithm’. It is the reality of today’s markets!

The problem with all our digital trading markets is that the human aspect to trading is being removed (totally). Most of all trading is now electronic and all our major exchanges are now electronic. This makes artificial intelligence the best means for trading today’s markets. Robots and algorithms are the best option for most trading activity. In fact our speed of light markets almost demand that traders use algorithms and source codes for effective trading. There are all kinds of different algorithms which can trade, learn from prior trading decisions, and set parameters for getting in and out of trades. This is now reality for every computer trader.

Why do our markets continue to go up irrespective of geopolitical events and trader emotions? Why can a price (say for silver or gold or oil) be manipulated up or down with a trading strategy using algorithms? This has become the default method of trading for most of our traders and institutions. Supply and demand (via human negotiation) has been mostly replaced with speed of light spoofing and other trading gimmicks (with algorithms as the means). Following is a description of the concept called ‘spoofing’:

Spoofing is a disruptive algorithmic trading entity employed by traders to outpace other market participants and to manipulate commodity markets.[1][2][3] Spoofers feign interest in trading futures, stocks and other products in financial markets creating an illusion of exchange pessimism in the futures market when many offers are being cancelled or withdrawn, or false optimism or demand when many offers are being placed in bad faith.[4] Spoofers bid or offer with intent to cancel before the orders are filled. The flurry of activity around the buy or sell orders is intended to attract other high-frequency traders (HFT) to induce a particular market reaction such as manipulating the market price of a security.

In Australia layering and spoofing in 2016 referred to the act of “submitting a genuine order on one side of the book and multiple orders at different prices on the other side of the book to give the impression of substantial supply/demand, with a view to sucking in other orders to hit the genuine order. After the genuine order trades, the multiple orders on the other side are rapidly withdrawn.”[16]

Our trading algorithms can now be programmed with a source codes which can spoof and layer trades without anyone being aware of what is happening. So far, our corrupt officials at the CFTC and the SEC do not seem to deal with all these trader source codes. This allows private Quant’s and similar programmers to create algorithms which manipulate our prices and our various markets with no oversight. Who can compete with speed of light trading, cancellations of trades, withdrawals of trades, and all the other gimmicks which our algorithms can accomplish at near the speed of light.

We need to get educated on the NEW trading environment which is now ubiquitous. Forget the Open Outcry Trading mentality. This is nearly totally abolished given today’s electronic markets. Human decision-making is being replaced with robots, automated trading, algorithmic trading, and high frequency trading. The new word for everyone to remember is ALGORITHM. We live in a NEW world of electronic trading, price discovery via algorithms, price manipulation via algorithms, and fraudulent trading by centralized authorities (also via algorithms). Machines rule over prices and Quant’s rule over source codes used by algorithms. Basically the markets today are RIGGED and the system is CORRUPT. I am: https://kingdomecon.wordpress.com.

7 Comments leave one →
  1. therooster permalink
    July 13, 2017 5:06 am

    Algorithms can be very proactive if used correctly and are actually essential to compare asset values when trading an asset for another asset without the use of any debt at all.

    When we look at the classic example of buying an economic widget like a new suit for a measure of gold, we see this in action. In order for good supply and demand fundamentals to be adhered to, fair trades are required and this is where price comparisons become useful so that the economy keeps moving , while we also don’t leave the shelves empty because of an excess and imbalance in demand. Good prices serve this purpose.

    In a debt currency swap for economic widgets, prices can and have become disjointed and become poor reflections of real economic fundamentals. This is not because of a pricing concept flaw, however, but because of the effect that debt currency’s discipline/lack of discipline has and the effect that this has on prices.

    Using a price model for asset-to-asset trades adjusts pricing so that pricing can come back into line with real economic fundamentals. It’s a market process.

    The necessary evil in all of this is that a free floating price model could not and cannot be created without the necessary evil of a free floating currency development (debt based) that operates at “the other end. Think of a dollar like a segment of string that has two distinct ends, one being the currency application, while at the other end , we find the pricing tool.

    In the development of the price model, the creation of the debt currency becomes a cost to society and large amounts of debt get created. Once the price model has matured, however, the price model can be applied to asset-to-asset trading and debt can then be unwound and destroyed. This is the junction point that our society is at right now.

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    • July 13, 2017 9:44 am

      Algorithms also crash and distort prices. Prices may not reflect supply and demand. This is a huge problem. D

      On Jul 13, 2017 5:06 AM, “Kingdom Economics – The Future Is Now” wrote:

      Like

      • therooster permalink
        July 13, 2017 10:22 am

        yes, Don, but that’s only because of what’s on the “other end” in the way of the currency that interfaces with the price. As I already said, debt currency usage can distort prices, but that is NOT the fault of the price model, in of itself.. It’s simply a poor relationship, based on a proliferation and a winding of debt.

        In the asset-to-asset use of the price model, the debt gets unwound in a process that leads to strong resilient economic activity and proper price discovery.

        Your observation , although accurate , is based on hindsight within “the Yin”, in the “Yang’s” absence. Try doing more modeling on an asset-to-asset trade basis where debt gets safely purged and you will discover what “the Yang” really means in the process of completing a full model for global liquidity.

        ….. like light emerging from darkness in the order of creation.

        Like

      • July 13, 2017 10:39 am

        The problem is that your light is often what I view as darkness. We think differently. D

        On Jul 13, 2017 10:22 AM, “Kingdom Economics – The Future Is Now” wrote:

        >

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      • therooster permalink
        July 13, 2017 12:18 pm

        I don’t know how you perceive my reference to “the light” within the total model for real-time liquidity, which, by the way , is a hybrid. You may have it all wrong.

        The forerunner for creating a global price model that is flexible to the point of being able to reflect real market fundamentals requires the creation of that price model by none other than a floating currency. This goes back to the definition of a dollar’s use as being like a segment of string that has 2 applications, which in this case means the application of the currency (debt based) and the distinct application of the price tool which is at the other end.

        The price tool is vital for debt based trades and asset based trades, alike, but can only be created at “the other end” of a floating currency. Debt is the incidental necessary evil in the creation of the debt currency that forms the price model.

        The debt currency creation is what I refer to as the “Yin” ….. the “dark side” within the total model of REAL-TIME liquidity. It is created in advance of the “Yang” in proper order.

        The Yin had to form first, before the modern floating price model could take form and be applied in the marketplace. Now that the price model has market traction, however, it can be put to a more legitimate use by comparing assets values … the price of one widget against another widget , like trading gold for a new suit. This still calls for agreement , however, and this is where the price model begins to approach proper price discovery as existing debt becomes easy and safe to purge.

        The Yang is the gold based liquidity (in REAL-TIME) that makes up the other half of the model, but that half can only follow the creation of the Yin , because of the need for the real-time price model, a product of the information age.

        For reasons that should be obvious, the total hybrid of real-time currencies, both debt based and asset based could not evolve until real-time price capabilities came along , a function of the digital information age.

        You cannot pour new wine into old wineskins.

        I think you need to ask me more pointed questions that deal with actual trades and/or liquidity flows and/or debt flows/purgings. .

        Like

      • July 13, 2017 12:22 pm

        I understand your model. How has it performed this past year? Specifics please D

        On Jul 13, 2017 12:18 PM, “Kingdom Economics – The Future Is Now” wrote:

        >

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      • therooster permalink
        July 13, 2017 12:54 pm

        It’s not my model. It’s Goldmoney’s model. You can research many announcements and news releases from this link, however.

        https://www.goldmoney.com/corporate/news/

        Like

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