Saturday, 2 October 2010

Flash crash

A report on the BBC website identifies a single trader in a single company triggering the 700 point flash crash of the US stock market in May 2010. He ran an algorithm which rapidly sold a stock to the value of £2.6 billion. Automated trading is only as good as the person who designed the original algorithm. It is not investing and it can cause a lot of damage to unconnected people.
If experienced human traders are involved in the loop of placing trades there is the chance they can act as common sense circuit breakers in the trading process. Algorithmic trading is not investment it is merely gambling based on probabilities/historic events. It should be banned.

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