Sean Gourley: High Frequency Trading And The New Algorithmic Ecosystem

A good presentation on algos and their impacts on the markets we trade.

This presentation reminds me of a pattern I called VWAP Run that I take advantage of often. Many people who join me at my real-time chat room have heard me calling that out well ahead of time. Many are amazed how I do that. Well, it is not magic.

Consider the scenario where the bots all loaded up on the same side of the boat yet no stops are discovered which is necessary for these bots to exit their positions at a profit. By the time the market is about to close and that one bot chooses to just give up by dumping its position at market, the rest of the bots will follow and dump their positions all at the same time. They will go as far as dumping all the shares / contracts they acquired until the Volume Weighted Average Price of the trading day is reached.

This move is predictable if you know what to look for. For non-trained eyes, you would guess that someone was trying to shake you out of your positions, gunning for your stops, or controlling the price. The truth is much simpler than that. The bots collectively made the same mistake and choose to cut their losses at the same time.

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