Expect and Fear the Trading Bot

Be very careful ... 

I, Trading Bot

Algorithms are being unleashed on the crypto markets.

By Nathan Thompson  in CoinDesk

Opinion

 Movies about stock traders and investors often depict Wall Street mercenaries with great hair or uber-nerds wedded to their computers, but the age of the human trader is already a thing of the past. Welcome to the age of the “bot.”

Trading bots use algorithms that execute trades when certain market conditions are met. Since the early 2000s there has been strong growth in these bots especially as market data has become more sophisticated. Now the algorithms are being unleashed on the crypto markets.

Nathan Thompson is the lead tech writer at Bybit. This article is part of CoinDesk’s Crypto 2023 series.

Algorithmic trading is used across most capital markets. According to a 2020 report from the U.S. Securities and Exchange Commission, 78% of market trades were performed by “trading centers [that] depend on automated systems and algorithms.” Other commentators peg the volume of stock trades coming from bots at 60% to 70%.

Institutional traders rent or create their own bots that activate when the market hits certain conditions. These algorithms constantly search markets for the right trade setups, such as finding oversold stocks or trading a breakout. When they find the right conditions bots run scripts that determine the position size, execute the trade, employ stop-losses and exit automatically.

The bots are not perfect because they are created using past data, but the latest artificial intelligence (AI) and machine learning technology are already being employed – making them faster and more efficient than ever. Further, bots take the emotion out of trading (helping to stymie some of the emotional burden of investing in volatile markets).

See also: Become a Better Crypto Trader by Avoiding These Cognitive Biases | Opinion

“Reason is a slave to the passions” as philosopher David Hume said, and humans are by definition constantly at risk of making bad decisions based on emotions. For example, the infamous “revenge trade” happens when a trader fires ill-advised bids into the market in a desperate attempt to recoup a large loss, usually compounding their defeat.

More insidious is the fact that people don’t like being wrong. This makes them stay in a trade too long out of an irrational attachment to the company or digital asset when exiting is the best strategy.  ... ' 

Honeywell Introduces a Quantum Computer

Somewhat unexpected, but the announced major client makes it seem serious.  Trading strategies are a kind of process and decision making approach that will be good to follow to see ow Quantum will help.

Honeywell to Roll Out Quantum Computer
The Wall Street Journal
Sara Castellanos
March 3, 2020

Honeywell will introduce an early-stage quantum computer for commercial experiments within about three months, with JPMorgan Chase as the first public user. The new machine is expected to be the world's most powerful quantum computer, based on its expected quantum volume (a measure of the performance of a quantum system) of at least 64. Honeywell’s Tony Uttley anticipates the technology will be used by organizations interested in developing new materials or new trading strategies for financial services, or by those looking to speed up calculations. Marco Pistoia of JPMorgan Chase said he expects to use quantum computing to speed up computing-intensive calculations, including Monte Carlo simulations, which are commonly used to calculate the theoretical value of an option. Quantum computing could also be used in portfolio optimization.  ... "   .... '

Alexa Assistants come to the Trading Floor

Another example where hands-free can be very useful, and you need information quickly.   Adding an information channel.

JPMorgan Brings Amazon’s Alexa to Wall Street Trading Floors
By Hugh Son and Katherine Chiglinsky  in Bloomberg Tech

Voice-activated assistant can now send reports from analysts

Other firms such as New York Life using it to help employees
“Alexa, ask JPMorgan what the price target for Apple is.”

It’s a request that JPMorgan Chase & Co. institutional clients can now get quickly answered through Amazon.com Inc.’s ubiquitous voice-activated assistant. The bank and the e-commerce giant have partnered to provide JPMorgan’s Wall Street users with another way to access its research. Alexa is able to send analysts’ reports and related queries, and the bank is testing other features, like providing prices on bonds or swaps, according to David Hudson, global head of markets execution for the New York-based bank.

Voice assistants are “clearly becoming something people are habituated to in their lives,” Hudson said. “It’s about taking information that’s somewhere in the bank, that someone has to generally go and look for, or which is time-consuming or requires authentication to get, and putting that to you in another channel.”  .... " 

Chicago Merchantile Exchange Trading Challenge

Brought to my attention via Columbia connections.  Details at the link.

CME Group Trading Challenge
CME Group's Trading Challenge is a complimentary four-week electronic trading competition where teams of undergraduate and graduate students can trade a variety of CME Group products from multiple asset classes in a simulated trading environment on a real-time professional trading platform provided by CQG.

Top ranking students will be eligible for cash prizes and exclusive CME Group experiences.
This annual competition has grown each year - with 200 schools from 30 countries and nearly 500 teams competing in 2016. The Trading Challenge is a unique chance for students to learn hands-on techniques for trading futures. Teams must consist of 3 to 5 members from the same university and each must elect a student leader. Teams can participate on a student-led team or in cooperation with a faculty advisor. Advisors will have early registration access to register their teams. Please note, advisors are not permitted to participate as a member of the team during the Challenge and are ineligible to receive a prize if their team is a winner.  .... "