Traders and Computer Trading

The Globe & Mail's Report on Business magazine had a short blurb on the current state of computer trading in Canada. As many readers are likely aware, a huge chunk of the trading that occurs on stock exchanges presently comes from computer trading (such as high-frequency trading and computer-driven arbitrage).

I am not a trader and most readers of this blog likely aren't either, but you may be interested to see how the short-term traders act. Trading has always been tough—to make matters worse, many of the markets they operate in are zero-sum markets!—but now they are competing against computers following algorithms. I have never been a trader, and am not familiar with professional traders either, so it's not clear to me if the current environment is harder for the professionals. Instead of relationships, now it's down to the strength of the algorithms and computing power. As for amateur traders, I suspect the situation is probably the same as a decade ago (for small traders, whether you are competing against trading houses with massive capital and skill, or against powerful computers with a lot of money spent developing algorithms, it's probably the same difficulty).

The article profiled a few key players in Canada and had the following graphic on how some traders behave when trading against a computer.

(as usual, click on image for bigger picture)


During & After Open

(source: "The people behind Bay Street's trading supercomputers" by Tim Kiladze. Report on Business, The Globe & Mail. Last Updated January 27, 2012)


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