Trading while drunk

[nancylebov]

A broker trades while drunk and moves the price of oil as much as if there were a crisis.

Might it be possible to have "does this make any sense?" software? I'm not talking about something perfect, just a reasonable added filter to human or machine impulsiveness.

I've despised technical trading-- the belief that all the information is contained in the price-- for a very long time.

Link thanks to supergee.

Comments

[smallship1.livejournal.com]

Any properly designed "does this make sense?" software would break down at the very idea of futures trading. I don't care how much it may have benefited mankind, or how the global economies would all go belly up if it stopped (they're there anyway)--I'm paying more to refuel my car right now in part because some idiot with too much power got drunk two (three?) years ago and bought things that didn't exist.

Futures trading of any kind should be abolished. Full stop. You have goods, you sell them, you get money. You don't have goods, you don't. The only exception should be in cases like advances for books or recordings or whatever, where the primary producer undertakes to produce a specific work and, if that work is not forthcoming within the time, is penalised accordingly. Everything else--no solid goods, no cash. It should be that simple, and economics will never make sense till it is.

[pickledginger.livejournal.com]

Wow. Forget airplanes, the bad guys should be learning to fly trading software.

[st-rev.livejournal.com]

Futures trading makes economic planning more efficient, and makes prices and supplies of commodities more stable than they would be otherwise.

Case in point: for weird historical reasons, onion futures trading has been banned in the US since 1958. Onion prices in recent decades have been far more volatile than those of comparable commodities.

Futures contracts are basically a form of insurance. For example: an airline has a legitimate use for an oil futures contract. Oil prices make up a huge part of total airline expenses, and fluctuations in the market can have a potentially bankrupting impact on an airline's ledger. A futures contract allows an airline to lock in a price for a long period of time, and organize its operations accordingly. This constitutes a substantial positive economic benefit.

Note, also, that for the airline to buy such a contract, some other entity has to sell it. That's what investment banks are for, and properly run they provide an important service to the whole economy.

[st-rev.livejournal.com]

Might it be possible to have "does this make any sense?" software? I'm not talking about something perfect, just a reasonable added filter to human or machine impulsiveness.

You run into a recursion problem here: how do you tell if the "does this make any sense?" filter makes any sense? You have human judgement, and you have the best AI the humans can come up with, and that's all you have. In fact, a lot of concern these days seems to run the other way--how can we trust the programs, particularly the high-speed trading ones, without direct human oversight? There's no safe place to stand, no privileged wise governor.

[jsburbidge.livejournal.com]

Most trading software I know of - and I write it, though for equities rather than futures - has some protections built in. However, these are based on evaluating single trades based on price, volume, risk, and current position. Evaluating a set of trades that moves the market is far more difficult, and the sort of risk/hedging logic that is used to deal with inventory traders is hard to apply to retail traders who place orders for customers (which is what this man seems to have been).