question for those of your with real stock market experience

**i3igpete** · 08-04-2011, 01:15 PM

Market Report - Aug. 4, 2011 - CNNMoney

As stock market trading becomes more and more algorithmic, I wonder how much of these claims of "fear trading" are actually people calling the shots anymore.

Nowadays banks are hiring more and more math phd's that do nothing than write trading algorithms all day, is there such a thing as "investor panic" anymore? or is it just an effect of someone's code that was written 5 years ago?

**IPD** · 08-04-2011, 02:09 PM

there IS investor panic. but the triggering mechanism for it isn't human-based. at least that's my guess.

**UTRacerX9** · 08-04-2011, 03:24 PM

Originally Posted by i3igpete

Market Report - Aug. 4, 2011 - CNNMoney

As stock market trading becomes more and more algorithmic, I wonder how much of these claims of "fear trading" are actually people calling the shots anymore.

Nowadays banks are hiring more and more math phd's that do nothing than write trading algorithms all day, is there such a thing as "investor panic" anymore? or is it just an effect of someone's code that was written 5 years ago?

Everything begins with human trading and data input. A trading program won't know what actions the Bank of Japan made overnight, or that the debt ceiling legislation passed. What trading programs do is watch the market index or stock it is following, and when it hits a certain volume level, price level, or other criteria, will trigger a decision to buy/sell. Now, trading programs can certainly exacerbate a situation, but they do not start them. Automated trading is still dependent on human input and parameters. What you do see though, is once the market starts to slide, let's say 2% in a day, then some fund manager who has his orders set to trade when the market dips to 2%, sells out. That drops prices even more. Then another manager who has set his limit to 3% drop gets triggered, and his portfolio sells. It can be a vicious cycle, and the only thing to stop it are the system halts when it gets out of hand.

**i3igpete** · 08-04-2011, 03:53 PM

Right thats what I mean, there is no "panic" where someone is physically screaming "sell" into their telephone... it's an effect of something running on a black box.

**UTRacerX9** · 08-04-2011, 04:16 PM

Originally Posted by i3igpete

Right thats what I mean, there is no "panic" where someone is physically screaming "sell" into their telephone... it's an effect of something running on a black box.

LOL More or less correct. The screaming occurs when the doctor/lawyer/banker/engineer come home at night to check their finances and see that they lost $10-$20k in a day.

**AdamVR4** · 08-04-2011, 04:18 PM

So is today's plunge an isolated event or is it going to be ugly tomorrow too? And the next day?

**UTRacerX9** · 08-04-2011, 05:30 PM

Originally Posted by AdamVR4

So is today's plunge an isolated event or is it going to be ugly tomorrow too? And the next day?

If I knew stuff like that for certain Adam, I'd be drinking margaritas on a beach on my private island.

Fridays are always hard to judge, especially after a mass selloff like today and the past week. Do the big dogs think that the market has sold off enough, and prices are now attractive to them to jump back in and get a better price than they might on Mon, when some of the panic has subsided? And, you also have to consider what reports will come out tomorrow, which is the "Employment Situation" report, and the "Consumer Credit" report. If those are bad, then there's very little chance of the market making a comeback tomorrow.

The only thing you can do with any degree of accuracy is research a particular stock you are interested in, and follow it for a month or two. If you think it's reached a price that you want to buy in/sell out, do it. But trying to time the market is a fool's errand. You may get lucky now and then, but overall, you'll lose.