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Presenting The Natgas "Fractal" Algo

Tyler Durden's picture


Just when we thought we had seen it all, along comes another 19 year old math Ph.D. with the latest demonic-cum-fractal algo to show us just what cavemen we truly are...

h/t Taro


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Wed, 06/08/2011 - 20:30 | 1353086 Flakmeister
Flakmeister's picture

Do a Fourier transform and run it through a low-pass filter....

Wed, 06/08/2011 - 20:31 | 1353090 Flakmeister
Flakmeister's picture

almost forgot... acheter le creux putain!

Wed, 06/08/2011 - 20:46 | 1353126 flacon
flacon's picture

How else can pH-D students contribute to society? They are just taking their just deserts. ~ Keynes

Wed, 06/08/2011 - 21:31 | 1353277 Ahmeexnal
Ahmeexnal's picture

Nice bifurcation tree!

Wed, 06/08/2011 - 21:36 | 1353297 Caviar Emptor
Caviar Emptor's picture

Depends if you're a Euclidean

Wed, 06/08/2011 - 21:38 | 1353290 SumSUN
SumSUN's picture


Wed, 06/08/2011 - 22:01 | 1353364 msamour
msamour's picture

Indeed. (oui, en effet)

Thu, 06/09/2011 - 00:03 | 1353627 Thomas
Thomas's picture

Fourier Transform: That was funny. Looked like a free induction decay the second I looked at it.

Thu, 06/09/2011 - 05:52 | 1353909 falak pema
falak pema's picture

bravo! trilingual...english, french, and science!

Wed, 06/08/2011 - 20:43 | 1353131 Irwin Fletcher
Irwin Fletcher's picture

Done. With padding into positive time, it looks just like the downward-facing middle finger which, on the playground, used to signify the phrase 'Fuck Yo Mamma'

Wed, 06/08/2011 - 21:15 | 1353204 Frankie Carbone
Frankie Carbone's picture


A complex analysis deserves a complex number of kudos. 

I also offer you the conjugate. That way, you may receive REAL kudos. 



Also. Remember in the mathematical domain of financial crime, non-causal systems ARE physically realizable. 



Wed, 06/08/2011 - 21:34 | 1353271 Charles Wilson
Charles Wilson's picture

'N they always map onto the taxpayer, especially those with lots and lots of Hamiltonians.



Wed, 06/08/2011 - 22:17 | 1353394 Flakmeister
Flakmeister's picture

Nice.... \hattip


Wed, 06/08/2011 - 23:46 | 1353600 snowball777
snowball777's picture

Hi Flak,

Gotta love that 4d humor!

Wed, 06/08/2011 - 22:22 | 1353406 BobPaulson
BobPaulson's picture

I wonder what the FFT, wavelet transform or POD analysis would tell you about the structure in spectral space though - would the characteristic frequencies of these trading algos depend on internet speed or do they actually have intentional "wait" periods between trades? I haven't got a clue how they work.

Wed, 06/08/2011 - 23:48 | 1353595 snowball777
snowball777's picture

In essence, it's generating a mathematical analog of 'flack' to confoozle any dipshit algos expecting a linear or similarly simple could be noise shaped with particular statistical properties (a declining average say)...or perhaps some twinky has a bug in his VB code and is adding the occasional NaN value in his pricing subroutine.


Thu, 06/09/2011 - 01:02 | 1353727 ml8ml8
ml8ml8's picture

Internet speed is not an issue when your equipment is co-located immediately next to the stock exchanges' computer room / data farm.  Nothing stands between you and immediate trade execution except a fiber optic cable.  Once an HFT computer generates the trade, it's executed at the speed of light give or take a couple of picoseconds.

Wed, 06/08/2011 - 22:41 | 1353448 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

19 year old math Ph.D.

He/she started to suck dick early. It is amazing what social conditioning can create.

Thu, 06/09/2011 - 09:45 | 1354200 Stuck on Zero
Stuck on Zero's picture

That's the trace of the output from an unlimited feedback in a Class D amplifier.  It reached saturation and was shut down by the AGC.

Wed, 06/08/2011 - 20:31 | 1353091 JPG101
JPG101's picture

Badly rigged casino?

Wed, 06/08/2011 - 20:45 | 1353127 Conrad Murray
Conrad Murray's picture

Just another reason to pick up your ball and go home. Or, at the very least, head to another court. One with some integrity. One with some referees who aren't afraid to call bullshit.

Wed, 06/08/2011 - 21:24 | 1353251 JPG101
JPG101's picture

Proplem is: what do you do with 'your ball'? Not playing with it gets you killed by inflation. Putting it in PM gets you killed by taxation if and when your PM go up in price and you need to exchange them for fiat to buy an ice cream cone or something.

Wed, 06/08/2011 - 21:50 | 1353343 LongBalls
LongBalls's picture

Cash PM Dealers are everywhere bro'!

Wed, 06/08/2011 - 22:16 | 1353391 BobPaulson
BobPaulson's picture

Yes. Buy all your physical cash and don't give the vendor your name. If you have to use a cheque, you can get a money order cash from the post office. Same protocol as if you're buying drugs or gifts for your mistress.

Wed, 06/08/2011 - 22:35 | 1353443 dracos_ghost
dracos_ghost's picture

Who are you, Anthony Weiner :)

Wed, 06/08/2011 - 23:29 | 1353549 JPG101
JPG101's picture

A bit more complicated in Canada...

10000$ legal limit for crossing the US -Can border without 'financial instrument notice of declaration'

Any solutions for Canada?

Wed, 06/08/2011 - 23:41 | 1353567 GoinFawr
GoinFawr's picture

Get rid of the Conservatives.

Thu, 06/09/2011 - 02:40 | 1353816 Nage42
Nage42's picture

If you live Canada then show some patriotism!

The 1 ounce Canadian Maple Leaf has a face value as legal tender (financial instrument) of $50.

Thus, if you are subjected to a $CAD 10,000 limit, then this means you can _only_ bring across the border 200 coins...

Given that they tend to trade at a priemium above spot, you can imagine that it would equate to safely over $USD 310,000 in bullion value.

In Singapore, the limit is $S 30,000, so that is like 480 coins (close to 3/4th a million US, LOL!).


One instance where PM bullion tied to fiat is your friend!



Thu, 06/09/2011 - 03:27 | 1353847 JPG101
JPG101's picture

Very interesting and probably completely legal.

I would have to bring a lot of cash into the US though which must be declared. These things aren't concerns for the very rich. Just the mildly rich and miggle class...

Thu, 06/09/2011 - 09:45 | 1354202 Anonymouse
Anonymouse's picture

Maybe legal. Not sure. I've looked this up on line several times, and have never seen a firm opinion. Only speculation. Thing is, with asset forfeiture laws (since anyone carrying cash MUST be a drug dealer), do you want to risk it. You may think it is $10,000, but they may say it is $300,000 and take it.

But if anyone has seen a legal opinion on it, I would be very interested

Thu, 06/09/2011 - 08:08 | 1354012 BobPaulson
BobPaulson's picture

I am Canadian. When I am there, I just buy the bullion there in person from a dealer for cash. Now if the 10k is a bottleneck for you (you're buying more than 10k per day - so you're accumulating a couple million in gold a year) I think you can hire people to do your bidding, then hire other people to kill the people who did your bidding, then kill the killers yourself. You'll need to buy a hog farm, of course, to dispose of everything - be sure to incinerate the manure.

Thu, 06/09/2011 - 14:36 | 1355197 Cathartes Aura
Cathartes Aura's picture

can you forward this pitch to the Coen brothers in the hopes they can snag Jeff Bridges, et al - I can "see" it now, pure gold. . .

Thu, 06/09/2011 - 14:48 | 1355261 Let Them Eat Ipad
Let Them Eat Ipad's picture

not really help for getting PMs across the boarder (read the canadian maple tip below for that)  but you could always buy bitcoins and take a flashdrive across the boarder with as much currency as you wish.

Wed, 06/08/2011 - 20:33 | 1353095 bob_dabolina
bob_dabolina's picture

Fractals are soooo 60's

Wed, 06/08/2011 - 20:39 | 1353107 Korrath
Korrath's picture

The Great Algo War of 2011 is almost upon us; prepare accordingly...


Wed, 06/08/2011 - 20:38 | 1353112 RobotTrader
RobotTrader's picture

Same "Flash Crash" appeared on Finviz and

Wed, 06/08/2011 - 23:42 | 1353581 carbonmutant
carbonmutant's picture

Under Blogs or News?

Wed, 06/08/2011 - 20:40 | 1353119 RobotTrader
RobotTrader's picture

There have been five 50 point "flash crashes" on the DJIA futures on Finviz tonight:


Wed, 06/08/2011 - 20:50 | 1353142 Conrad Murray
Conrad Murray's picture

Little bit of ES funny business too?

Wed, 06/08/2011 - 22:00 | 1353362 Fidel Sarcastro
Fidel Sarcastro's picture

That chart looks f'ed up bro, the Sept ES is @ 1276.00 and there's the problem: ROLLOVER.  June is no longer "top step" tomorrow so all continuous charts are switching to the Sept contract tonight, thus the odd look to it.  Nothing special is happening here.

Wed, 06/08/2011 - 22:01 | 1353367 JohnG
JohnG's picture

ICE put out a notice that many quotes were down but orders were still processing.  A lot of the futures I watch went dark (in thinkorswim) for about 5 minutes around these times.

Wed, 06/08/2011 - 23:16 | 1353522 Dapper Dan
Dapper Dan's picture

Not a problem, they just hung up the charts before the ink was dry.

Wed, 06/08/2011 - 23:44 | 1353587 carbonmutant
carbonmutant's picture

More Funny Business tomorrow...

Wed, 06/08/2011 - 20:49 | 1353147 Cdad
Cdad's picture

Trying to coil the spring again, obviously, for another ridiculous algo driven BS rally....I'd suggest.  However, and since the economic writing on the wall is quite clear, as it has been written with red spray paint , it won't matter.  Until further notice, algo lifts will be met with the block selling of amazingly dumb and lazy fund managers until the magic words "money printing" are once again uttered.

The market is a flaming sell, computerized futures BS trades notwithstanding.

Wed, 06/08/2011 - 21:01 | 1353186 Conrad Murray
Conrad Murray's picture

Red spray paint? Reminds me of the clip of the guy who paints the V from V for Vendetta on the wall then shoots up his local council meeting.

Wed, 06/08/2011 - 20:45 | 1353124 max2205
max2205's picture

Natgas is a vicious market to trade. On top of it all are the NG oil pair which is about to destroy the long oil side before the next hurricane

Wed, 06/08/2011 - 20:47 | 1353141 Manthong
Manthong's picture

Some frackin' braniac should write an algo to detect feral algos to BTFD.

Wed, 06/08/2011 - 20:49 | 1353149 poor fella
poor fella's picture

We should just consider ourselves lucky that the algo's don't completely fuck up everything, for everybody on Earth, each and every day.  8)  

Considering it's like giving a newborn a straight-razor to play with or playing volleyball on a court with broken glass scattered about - I'd say we're doing damn well.

Wed, 06/08/2011 - 20:53 | 1353152 blunderdog
blunderdog's picture

I always wondered what it would look like if ya put a flanger on that...far out.

Wed, 06/08/2011 - 20:58 | 1353166 Yes_Questions
Yes_Questions's picture

In a way, this resembles a glow stick getting shaken to life, slipping out of grasp,  bouncing off a trampoline then getting caught.  Rave inspired algo!

Wed, 06/08/2011 - 21:09 | 1353214 SYantiss
SYantiss's picture

Isn't this how SkyNet comes to life?

Wed, 06/08/2011 - 21:44 | 1353307 Yes_Questions
Yes_Questions's picture

And/Or resistance is futile?

I still think certain parts of the market should not be subject to this.  I understand this particular market is notoriously volitile, but really? 

Ddad is the best on this, but from my perch, there is no credibility in the "markets".


Wed, 06/08/2011 - 21:11 | 1353219 OuaisBla
OuaisBla's picture

Nice catch Tyler. One things for sure, thoses computers know how to trade NG well!

Wed, 06/08/2011 - 21:12 | 1353224 Downtoolong
Downtoolong's picture

Do a bird next. Can you make it trade a graph that looks like a bird? How about a swan, you know, a nice black one.


Wed, 06/08/2011 - 21:16 | 1353225 Downtoolong
Downtoolong's picture

Do a bird next. Can you make it trade a graph that looks like a bird? How about a swan, you know, a nice black one.


Wed, 06/08/2011 - 21:16 | 1353226 Downtoolong
Downtoolong's picture

Do a bird next. Can you make it trade a graph that looks like a bird? How about a swan, you know, a nice black one.


Wed, 06/08/2011 - 21:13 | 1353227 Downtoolong
Downtoolong's picture

Do a bird next. Can you make it trade a graph that looks like a bird? How about a swan, you know, a nice black one.


Wed, 06/08/2011 - 21:27 | 1353252 Rynak
Rynak's picture

Hmm, the idea actually is amazingly elegant in its simplicity. Just shake it up, until the other players lose their cool... which will either trigger a massive buying rally, or selloff..... depending on which of both happens, BTFD or STFT. Not sure how to even protect against that....  in this particular case, one could simply do nothing at all.... yet, if the program is just adjusted a little bit, that may put you on the losing side.

Bottom line: Someone shouldn't even be able to do this at such a speed. HFT in general is the problem as usual.

Wed, 06/08/2011 - 22:08 | 1353374 Mediocritas
Mediocritas's picture

Yeah. Shake it up enough and other players / bots will exit the game. Easy enough to predict in advance and take a profit from a net short position. Of course the SEC won't do anything about such manipulation because for its billion dollar budget it operates with a trade-resolution at day level, not millisecond level.

Fuck the SEC. Give Nanex a SWAT team and this will be all be over faster than a trade bot can blink.

Wed, 06/08/2011 - 21:28 | 1353260 knowless
knowless's picture

i'm still trying to figure out what things like this mean in gold/silver, does this happen every day and i just miss it?

Wed, 06/08/2011 - 21:43 | 1353321 dbach
dbach's picture

That's thin after hours trading, after New York and Chicago go home but before Japan, et al come online. That's normal to have a tight range that bounces back and forth.

Wed, 06/08/2011 - 22:28 | 1353424 knowless
knowless's picture


Wed, 06/08/2011 - 21:36 | 1353281 cheesewizz
cheesewizz's picture

 I too have seen some good ones, but that is the cherry on top...

Wed, 06/08/2011 - 23:26 | 1353548 Yen Cross
Yen Cross's picture

  New name?

Thu, 06/09/2011 - 00:55 | 1353711 mamba-mamba
mamba-mamba's picture

New Name: Self-Excited Oscillator, or SEO.

Wed, 06/08/2011 - 21:42 | 1353303 Caviar Emptor
Caviar Emptor's picture

Tiene algo

Thu, 06/09/2011 - 00:38 | 1353673 DoChenRollingBearing
DoChenRollingBearing's picture


Wed, 06/08/2011 - 21:41 | 1353310 ebworthen
ebworthen's picture

Reminds me of that Memorex commercial where Ella Fitzgerald hit just the right frequency to shatter the wine glass.

Video of matching frequency to resonant frequency of the glass using a horn drive and enough amplitude to break the glass:

Wed, 06/08/2011 - 21:51 | 1353335 Element
Element's picture

heh, good analogy.

Wed, 06/08/2011 - 23:17 | 1353523 magis00
magis00's picture

Points to ZeroHedge, and to you, sir.  I love it. I absolutely fucking love it.

Wed, 06/08/2011 - 21:42 | 1353314 Quadlet
Quadlet's picture

OK, start with the computer above, add a little of this:

and also have it do this:

What do you get?



Wed, 06/08/2011 - 21:44 | 1353328 alien-IQ
alien-IQ's picture


Wed, 06/08/2011 - 21:54 | 1353341 AmCockerSpaniel
AmCockerSpaniel's picture

Talking head??

Wed, 06/08/2011 - 21:43 | 1353318 anonnn
anonnn's picture

Kudos to the inventor...

Elegant demonstration of deliberate creation of insider-status, at will and with infinite variability.

Proof that criminalizing "insider" trading is futile since its definition allows no practical boundaries.

A better approach is to somehow limit the benefits to discourage the act...via taxes or, cum hopium, an effective justice system

Wed, 06/08/2011 - 21:43 | 1353323 alien-IQ
alien-IQ's picture

I have no idea what I'm looking at.

I think Tyler just drew up some squiggly lines to fuck with our heads.

Thu, 06/09/2011 - 02:41 | 1353813 Mec-sick-o
Mec-sick-o's picture

The chart shows a non-human price oscillation.  It is a typical behavior seen in computer programs or algorithms that are not adequately programmed or tested.

Algorithms are just math formulae (or computer steps) that evaluated at fixed intervals of time (sampling time) and usually have some feedback from itself in order of several past iterations.

An example of a bad algorithm is for example O(n)=I(n)-O(n-1)

n=1, I=10 ... O=10

n=2, I=10 ... O=0

n=3, I=10 ... O=10

n=4, I=10 ... O=0

and if you continue, and chart O (output), you see it resonates badly... even though I (input) is constant.

Wed, 06/08/2011 - 21:50 | 1353331 Element
Element's picture

 ... and no one goes to prison.

Wed, 06/08/2011 - 21:49 | 1353338 chump666
chump666's picture

so, you see insane volatility like that fix a put on the spread.  You would have made cash on that...

adapt or die

Next is a major index again May 6 2010 redux

Wed, 06/08/2011 - 21:50 | 1353342 chump666
chump666's picture

just watched japan margin traders get wiped on a nutso buying pre AUD meltdown

Wed, 06/08/2011 - 22:08 | 1353375 Phillips Capital
Phillips Capital's picture

guitar string plucked, then snapped. 

Thu, 06/09/2011 - 02:32 | 1353809 NoClueSneaker
NoClueSneaker's picture

... chicken picking ... :-P

Wed, 06/08/2011 - 22:10 | 1353388 Liquid Courage
Liquid Courage's picture

Hell, that's nothing ... just wait 'til these quant critters get ahold of Imaginary Numbers ...

An imaginary number is a number with square that is negative. When any real number is squared, the result is never negative. Imaginary numbers have the form bi where b is a non-zero real number and i is the imaginary unit, defined such that i 2 = −1.


When that algo is unleashed on the market, the universe will instantaneously contract to zero volume and infinite mass.

Wed, 06/08/2011 - 22:18 | 1353397 Reese Bobby
Reese Bobby's picture

But he isn't wearing anything at all!

Wed, 06/08/2011 - 22:17 | 1353402 BoNeSxxx
BoNeSxxx's picture

Typo... I think he meant demonic-cum-facial.

Wed, 06/08/2011 - 23:25 | 1353542 Yen Cross
Yen Cross's picture

  I like you, but quit stealing from the REAL777.

    Get Blue and smart

Wed, 06/08/2011 - 22:18 | 1353407 ThirdCoastSurfer
ThirdCoastSurfer's picture

Come on people, has no one seen the movie "Limitless"?

It doesn't take the right algo, just the right drug!

BTW: If you haven't seen the movie the plot is thinner than Leann Rimes. Or is it? A guy doubles his investment every day for two weeks and then begs for a job working for an M&A firm! Those Wall Street bonuses are awesome!

Wed, 06/08/2011 - 22:22 | 1353408 bigdawg
bigdawg's picture

Whew, that was close.  Almost got stopped out of that one. 

Wed, 06/08/2011 - 23:15 | 1353510 blindman
blindman's picture

Wed, 06/08/2011 - 23:15 | 1353519 rumblefish
rumblefish's picture

What exactly are we looking at?

Thu, 06/09/2011 - 02:55 | 1353825 ebworthen
ebworthen's picture

The carney at the state fair showing you how easy it is to win at wack-a-mole.

"Only five bucks, anyone can win, give me $10 and you and your girl can both win."

Wed, 06/08/2011 - 23:21 | 1353525 Korbin Dallas
Korbin Dallas's picture

Under-damped with an accidentally-found resonance killed by a limiter - so '70's.

Thu, 06/09/2011 - 00:51 | 1353700 mamba-mamba
mamba-mamba's picture

Not underdamped. Negative damping. An underdamped system is still stable, and in underdamping, the amplitude of the oscillation decreases with time, whereas this one increases (until something else gets triggered).

Actually, I think the best term is "self-excited oscillation." I propose we call this algo the SEO. But you are right that something killed it.

To me it looks like the SEO triggered a sell algo (the steep decline is discontinuous with the earlier osicllatory part), and then something killed both.

Other ways to look at it: positive feedback at high frequency. Negative phase margin. Unstable impulse response. Etc.


Thu, 06/09/2011 - 02:50 | 1353821 ebworthen
ebworthen's picture


Perhaps it was intentionally self-excited.

Take a look at the volume.

If the program was one of the buyers in the millisoeconds after the intentional oscillation and steep decline, say with an intentionally random or non-oscillation frequency - with a fairly robust assumption that something like Nat Gas would be bought by others with a steep enough of a decline - I would say the algo could have been intentionally self-excited.

It would make a good cover at the least.


Wed, 06/08/2011 - 23:22 | 1353535 Yen Cross
Yen Cross's picture

 ALGO's= dysfunctial (HUMAN MINDS)

Thu, 06/09/2011 - 01:02 | 1353721 ml8ml8
ml8ml8's picture

duplicate deleted.

Thu, 06/09/2011 - 01:06 | 1353739 alexdg
alexdg's picture

I'm sure the CFTC is on it...

Thu, 06/09/2011 - 01:33 | 1353758 kennard
kennard's picture

The same thing is happening tonight with Dow and S&P futures.


Why is it always a move down, rather than up?


Wouldn't this be easy to arbitrage?

Thu, 06/09/2011 - 02:09 | 1353797 chump666
chump666's picture

Europe tends to go green first (not always) in volatility trades then sells when US opens. Algos trading kicks in now (Europe open).  The market is turning bearish now, so rapid Algo movements will occur. juicy sells and rebounds. If you can catch them. 

Thu, 06/09/2011 - 02:09 | 1353800 chump666
chump666's picture

...but if we are talking about chaos theory and algo trading, sure, the F*up will be internal and spread. The Zero Hedge chart above is an excellent source material. All traders (human) should study it.

Thu, 06/09/2011 - 01:35 | 1353762 BorisTheBlade
BorisTheBlade's picture

Fractals PhDches! Had to be said

Thu, 06/09/2011 - 01:42 | 1353774 cashcow
cashcow's picture

It's just algos mugging algos, locked in their own little fightclub and trying to signal the outside world for help.

Thu, 06/09/2011 - 02:39 | 1353815 chump666
chump666's picture

if anyone gives a damn huge risk trades (FX) call options expire next few days

Thu, 06/09/2011 - 02:49 | 1353822 Nage42
Nage42's picture

The "wack and float" is a direct transfer from tax payers dollars to HFT offshore.


Government support mandate to keep S&P from falling, HFT wacks it on the head with bear rush and finishes with long buy at trough of sell spree... then government's slow'n'stupid algo goes into buy mode to raise in thin market and HFT sells back at pre-wack price.  Same deal as FX traders in NZ/Oz counter trading market in ealry morning, then taking profit when Tokyo wakes up.  Clockwork.


Your US tax dollars at work for you.  /golfclap.


It'd be classic if those were Chinese HFT algos, getting all their profit back from devalued Treasuries... oh the irony!!


Thu, 06/09/2011 - 03:56 | 1353858 Ponzi Unit
Ponzi Unit's picture


Thu, 06/09/2011 - 08:16 | 1354024 Downtoolong
Downtoolong's picture

Used to be that scientists were required to conduct dangerous experiments in a laboratory before releasing their new technologies into mainstream application. Not any more. Today, these algo traders are using the entire market as their lab and small investors are the equivalent of lab rats. If these HFT companies were pharmaceutical developers they would just throw every new test drug into the water supply to see what happens.

Thu, 06/09/2011 - 09:30 | 1354154 Ted K
Ted K's picture

Isn't this where Milton Friedman or the 3 times married Catholic New Gingrich is supposed to show up with a pointer and tell us how the right side of this graph proves EMH???

Thu, 06/09/2011 - 10:15 | 1354266 I did it by Occident
I did it by Occident's picture

Maybe it's Skynet's first inklings of becoming self-aware?

Thu, 06/09/2011 - 11:52 | 1354618 Shooting Shark
Shooting Shark's picture

I would call this RGPO, Range Gate Pull-Off.

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