How Automated Trading / Algorithms Can Affect Commodity Trading

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There are a few ways that programmed trade competence impact line trading.

First, there has been a flourishing association over brief durations of time between opposite commodities. A 2012 investigate paper found a pointy boost in a correlations between line like corn and soybeans and a U.S. equity marketplace over five-minute, 10-second, and one-second frequencies. The researchers attributed these correlations to a arise in algorithmic trade and warned that it could potentially means issues.

Second, a flourishing superiority of algorithmic trade means that traders are expected to see a larger series of remarkable and astonishing cost movements. While regulators are introducing manners to fight these trends, program is disposed to glitches and it’s scarcely unfit to wholly equivocate any of these problems. The good news is that safeguards could be put in place in sequence to extent a impact of these movements around fail-safes on an sell level.

And third, a ongoing automation of trade might take divided opportunities for tellurian traders to beget a unchanging distinction in a zero-sum marketplace like commodities. The ability of computers to fast analyze, interpret, and act on information severely surpasses that of any human.