Robot Wars on Wall Street?
Remember Robot Wars?
People got together in basements and garages and built impressive robots that were generally souped up with hammers and saws and the occasional flamethrower. Then, they put their creations in a caged arena and proceeded to smash the crap out of each other’s robot.
It was sort of a Ultimate Fighting Championship for nerds.
You probably thought that as an investor, you’re safe from the threat (or opportunity) of being pummeled by a robot.
According to Popular Science’s web site, financial experts, usually called quants, are using algorithms that duke in out automatically in the various trading markets.
This isn’t totally new. For years–decades even–traders have used algorithms to find, set up, execute and exit positions. But, now things are getting a little more complicated. These new algorithms can sniff out other algorithms and determine how they are making trades. They can even send false signals to throw off other quants from their strategies.
These computerized bobs and weaves are meant to find and take advantage of market and trading conditions.
News that trading algorithms are fighting with our money has some investors upset. It may seem deceptive and even scary.
However, let’s face it, humans have been doing this since tribes traded conch shells for arrowheads. This is just faster and more efficient than any one human or even a team of humans can do.
Another thing. As computing power increases exponentially, you can bet that more and more advanced artificial intelligence and machine learning technologies are going to be trading your money.
Welcome to the Technological Octagon.