The Center of Gravity and Algotraders Part II

17 December 2016, 06:33
Muhammad Elbermawi

The Center of Gravity and Algotraders Part II



When I first had the idea to calculate the center of gravity of a stock movement, my aim was to find logic where there was none. I could not imagine that, ten years later, I will find out that some algorithms "like" to keep waiting until they reach the level of the center of gravity before they trigger a series of small-lot orders.

The aim being to build up a position in the most discreet way possible or to unwind another one without being noticed.

I leave you the pleasure of discovering for yourself the maneuvers of Algotraders around the center of gravity. Is it sheer coincidence? Or is it mathematics?

The key to professional trading is to get one’s orders executed. When an Algo wants to "order" 3,200 lots, it can use an "iceberg", or a machine gun of 100 lots at different levels, like a body-swerve in football. There are as many algorithms as many different types of human intelligence.

However, you will see that there is a kind of consensus at the level of the center of gravity... a consensus that we need to learn to decipher.

We, humans, find intellectual and emotional pleasure as long as we get to perceive perfection and harmony. That's why we love music, painting, dance, high dives, etc.

Welcome to the pleasure of discovering the mathematical magic in financial markets, the amazing presence of the golden number at every impulsive or even corrective movement.

Welcome to the pleasure of discovering how harmony controls the stock chaos. In fact, it masters it, defines it and even limits it. From both the philosophical and mathematical points of view, it is wonderful to fully enter into this truth that seems inexplicable but in which we have full confidence.

Mathematical harmony governs the universe and this is why it will always be greater than the chaos reining in the stock markets, be it real of a fake. Henc, the certainty that a well-trained human brain will always be more powerful than algotraders.

-->Tracking Algotraders- Part I

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