Man Vs Machine: How Each Sees The Stock Market Part 2

Tyler Durden's picture




 

Two weeks ago we shared a post on the topic of variant perception, specifically how the two distinct classes of market participants, humans and machines, view their natural habitat. Judging by the interest in the article, this approach to breaking cognitive dissonance was quite welcome, which is why courtesy of Nanex, we bring you part two.

This is what you see:

This is what HFT-bot (which according to the SEC provides liquidity by lifting limit offers) sees:

The actual move up took just 275 milliseconds:

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Fri, 04/13/2012 - 18:50 | 2342932 cheesewizz
cheesewizz's picture

so the large number of quotes vs. orders are the bots stuffing?

How do yo tell if it's a bot or human? Is it the speed?

I have been watching the sales on my trades and there are tons of 100 bid and ask sales moving across. What size do the bot trade?

Give us more details to the workings of the bots and how to spot the.....

Thanks cw

 

Fri, 04/13/2012 - 18:53 | 2342941 Alex Kintner
Alex Kintner's picture

All in the blink of a robots eye. Skynet is pleased.

Fri, 04/13/2012 - 19:16 | 2342973 ebworthen
ebworthen's picture

"Oooh the colors, such pretty colors, especially with these glasses. 

I just know these markets are going to the moon! 

Time to buy humans, buy-buy-buy!"

http://www.flickr.com/photos/79008263@N05/6928928630/in/photostream

 

Fri, 04/13/2012 - 19:21 | 2342980 TapperIsTicked
TapperIsTicked's picture

You saw colors.

My sphincter tightened.

Fri, 04/20/2012 - 03:55 | 2360475 MeelionDollerBogus
MeelionDollerBogus's picture

forget skynet

we get CRAMER-NET

Fri, 04/13/2012 - 19:17 | 2342976 YesWeKahn
YesWeKahn's picture

When analysing complex problems, human brains are far more better than computers. But all the news are pre-fabricated by the very same people who control the trading robots, human investors, cough, cough, I meant, mupphets are doomed to fail.

Fri, 04/13/2012 - 19:36 | 2343000 fuu
fuu's picture

 

 

NSDQ 22% trades/quotes

BOST 3% trades/quotes

PACF 35% trades/quotes

BATS 23% trades/quotes

CBOE 5% trades/quotes

EDGX 29% trades/quotes

EDGE 18% trades/quotes

BATY 2% trades/quotes

PHIL .47% trades/quotes

 

Fri, 04/13/2012 - 19:38 | 2343006 schatzi
schatzi's picture

Wouldn't placing time limits on trades be a great idea? Say for example every brokerage can only trade one stock/commodity/etc. per second.

Fri, 04/13/2012 - 19:54 | 2343020 scatterbrains
scatterbrains's picture

time limits would be the ruin of these crooks.  If the houses agree to kick back and forth a couple millions shares a day using HFT to drive the price of AAPL to the moon and at the end of the day swap each other back to break even while having pushed AAPL up 20 points and in so doing loading positions for the bear raid why would they want time delays ? Any one who buys into this price mirage is like food for the wood chipper... go ahead stick your head in there if you like the blades arn't sharp.

 

 

Fri, 04/13/2012 - 19:40 | 2343007 YesWeKahn
YesWeKahn's picture

Is this so called random walk?

Fri, 04/13/2012 - 19:44 | 2343012 non_anon
non_anon's picture

robots, bitchez!

Are We Giving Robots Too Much Power?

http://www.youtube.com/watch?v=OGxdgNJ_lZM

Fri, 04/13/2012 - 19:44 | 2343014 The Navigator
The Navigator's picture

For the average investor, we are the 99% and the machines are the 1% - can't beat 'em in that casino.

Fri, 04/13/2012 - 19:51 | 2343017 babylon15
babylon15's picture

So who made money doing what trades?

Fri, 04/13/2012 - 20:11 | 2343036 10044
10044's picture

Pffff, goldman sachs

Fri, 04/13/2012 - 20:06 | 2343030 divedivedive
divedivedive's picture

I would appreciate it if someone could explain the true function of Intermarket Sweep orders.

Early this week I placed an order to sell 500 shares of a popular ETF. I don't remember the specific price but let's say the 'top of book' was xx.43 / xx.47. I put my limit in at xx.46.

I got a partial fill of 20 shares very quickly, but it took at least a minute for my 480 shares to show up in the level 2 and then it sat there. I watched at keast 12-20 trades execute at my ask with my order sitting at the top of the book. 

I called the broker and said what's up. They said all the orders I saw executed in the Time and Sales window were Intermarket Sweep orders. Finaly when the bid rose to my ask the trade executed. This is a new broker for me (a very large one). I've never seen this happen with my older broker. Is it that my older broker was probably placing my trades as 'sweep' orders to get them executed faster ?

 

Fri, 04/13/2012 - 20:25 | 2343059 ebworthen
Fri, 04/13/2012 - 20:07 | 2343031 pleseus
pleseus's picture

Stock market dark matter. Doesn't mean shit to me. I read the USA Today, drive a truck and shop at Walmart. All I know is risk on/risk off.

Fri, 04/13/2012 - 20:16 | 2343047 Amish Hacker
Amish Hacker's picture

Go to the head of the class.

Fri, 04/13/2012 - 20:25 | 2343058 Yen Cross
Yen Cross's picture

 Man = ( ) Event Horizon<>

Sat, 04/14/2012 - 00:10 | 2343264 Arkadaba
Arkadaba's picture

Quickly looking at the first chart I saw "Even bar" - I knew I was not processing correctly. 

Fri, 04/13/2012 - 21:04 | 2343103 q99x2
q99x2's picture

Precognitive

Fri, 04/13/2012 - 21:48 | 2343142 jack stephan
jack stephan's picture

That Aldous Huxley comment was good, thats why I like reading here.  Everyone should always smell a rat, how high is the leverage now??  40 percent or more now, slowly dwarfing a few years ago.  How many fucking trillions???????????

Well hit quadrillion soon.  What a silly reality, I guess its been like this a few times before.

Fri, 04/13/2012 - 23:18 | 2343200 Yen Cross
Yen Cross's picture

Easy there "Artemus Gordon" We are " Lip Synching" the Central banking system!

  The { N} is earned!

Fri, 04/13/2012 - 22:42 | 2343180 Atomizer
Atomizer's picture

23 January 2012 by Patrick Byrne

 

Read the comment section. Muppet Stream Media <crickets>

 

Fri, 04/13/2012 - 23:08 | 2343198 Yen Cross
Yen Cross's picture

Sublime? Tyler posted it!  swap lines

Fri, 04/13/2012 - 23:28 | 2343214 SillySalesmanQu...
SillySalesmanQuestion's picture

I can't see, hear, react or trade at warp speed.

Fri, 04/20/2012 - 01:43 | 2360398 MeelionDollerBogus
MeelionDollerBogus's picture

You don't need warp speed. So long as you can set bids and asks in your orders that they can see, you can lead them on. You can also let others lead them on while your order, hopefully in a minority (someone can check, in theory you can too) is ready to actually interact profitably with any one of the HFT's. their time-scope is NOT minutes to weeks and if yours is you can get a good deal heading into those minutes to weeks. They can't look at every scope at once because the algorithms aren't the same for both time-scales - they are in fact conflicting.

The HFT's can serve but ONE master at a time - the short-term nano-second profiteering OR the longer-term multi-week strategies.

Sat, 04/14/2012 - 00:42 | 2343298 Money Squid
Money Squid's picture

From this article I conclude Cognitive Dissonance works at Nanex

Sat, 04/14/2012 - 03:10 | 2343553 connda
connda's picture

Skynet is taking over.  Skynet will succeed.  Useless eaters must be terminated. 

Sat, 04/14/2012 - 04:12 | 2344232 Motorhead
Motorhead's picture

Charts, bitchez, even fucked up ones!

Sat, 04/14/2012 - 06:17 | 2345084 sockratte
sockratte's picture

anyone knows a hft provider? dumbasses think they have an advantage with hft...

Sat, 04/14/2012 - 08:32 | 2345142 orangegeek
orangegeek's picture

What the heck, let the Cylons run things.  And when they take over mother earth, we'll just jump aboard our Battlestar Galactica and hang out somewhere else.

 

Artificial intelligence is permeating many aspects of our lives, but they are only as good as the humans that develop their thinking.  These AI systems do respond quicker, but if the decision is wrong, speed won't help.

 

Remember the May 2010 10 minute market collapse?  Glitch my a**!!  HFT making decisions with no overide or kill switch.

 

Here's a weekly - the top of this collapse is noted at the (W) Z wave.

 

http://bullandbearmash.com/index/djia/weekly/

Sun, 04/15/2012 - 08:15 | 2346324 ebworthen
ebworthen's picture

Nice chart, thanks.

Fri, 04/20/2012 - 01:40 | 2360395 MeelionDollerBogus
MeelionDollerBogus's picture

These AI systems do respond quicker, but if the decision is wrong, speed won't help.

Remember the May 2010 10 minute market collapse?  Glitch my a**!!  HFT making decisions with no overide or kill switch.

Who says the machines were wrong?

The computers are programmed to profit - NOT TO LIE.

It's HFT-rigging that gets max # transactions & tries to get other machines to guess wrong.

It's HUMAN-RIGGING that lies & defrauds balance sheets and prints money - the AI's are not in charge of that. What do you think is doing more harm to human share-holders?

Sat, 04/14/2012 - 09:35 | 2345201 crawl
crawl's picture

Another Nasdaq stock being manipulated?  Say it ain't so! 

Professional thieves at work, using bots.  And people wonder why trading volume is on the decline.

Sat, 04/14/2012 - 10:02 | 2345230 tricky rick
tricky rick's picture

When the hair goes up on the back of your neck...  fight or flight?  Or, let a reasonable lawyer sooth your ruffled feathers  (little red riding hood)

who's for dinner???    filet of fool who fell for it...

It's in your hands... the only thing that IS yours!

 

Sat, 04/14/2012 - 11:16 | 2345300 Money 4 Nothing
Money 4 Nothing's picture

This is probably why all the retail traders went buh bye along time ago.

This trading day brought to you by Hasbro Etch-A-Sketch.

Sat, 04/14/2012 - 16:40 | 2345657 WmMcK
WmMcK's picture

Mine says Ohio Art (pre-China). But I've upgraded to using Spirograph.

Sat, 04/14/2012 - 11:41 | 2345323 Crash2012
Crash2012's picture

Let's go back to trading stocks in fractions!

With .25 cent increments, 25x FEWER steps would be possible than happen with .01 increments!  At a minimum, this would result in 25x FEWER trades!  I suspect that the number of trades would be even lower than that as there would be less bot-to-bot activity as well!

 

Sat, 04/14/2012 - 12:18 | 2345355 GrinandBearit
GrinandBearit's picture

A rigged game.  Don't feed the hole.  Don't trade... Don't contribute to retirement accounts... Don't keep money in bank or brokerage accounts.

As we near the end, things will get become increasingly absurd and bizarre. 

We are almost at the end... I can't wait to see it all crash and burn.

Sun, 04/15/2012 - 08:14 | 2346323 ebworthen
ebworthen's picture

Ultimately, the machine will choose a 1 or a 0 (binary).

They have to have another machine to take the 1 or the 0 they want to buy or sell.

If all the machines want to sell their 1's and not buy any 0's you will have the mother of all flash crashes.

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