Theu.s. S P 500 - 1571 Words

The signs are everywhere; America’s trust in the market has been wavering for the last several years. The SP 500 has dropped to the lightest trading volume over the last 15 years. This decade there has been many notable financial events which have had crushing effects on the nations’ trust in the market. Just in case you forgot there was the 2000 dot.com bubble burst, 2001 September 11th attack, 2007 Sub-prime housing bubble, 2008 collapse of Wall Street, and we are still in an active war in Iraq. After reading several reviews the tragic events are not the ones that currently haunt the investors and violate their trust. Even after all of the turmoil, several individual investors are still more afraid of the complicated algorithms and†¦show more content†¦Stock Exchange was formed trading equities auctions style. The market was in good health and around 1930 the traditional way stocks was to research them using fundamental-analysis, which analyzed a companyâ €™s health by examining their historical metrics. This changed in 1951, Harry Markowitz applied mathematical concepts to the market, which helped create algorithms that could calculate several different stocks simultaneously. By the early 1970s the markets started moving away from the traditional auctions to Electronic Communication Networks *. Algorithm trading presents series of problems, a few for each side of the playing field, so individuals are not safe playing with them or against them. The first couple of problem with using algorithms to trade is program failure. Algorithms are tested using historical data, the reason this is a problem is because the market is always changing. Just because your parameters work on the historical data, does not guarantee success in the future. This is an extremely competitive field and this type of technology is constantly changing. These complex equations are always being built to exploit in the competitor’s current model. Depending on the platform the algorithm could reside on the network sever or an individual computer. If the equation resides on the computer, then it must constantly be connected to the internet or else the algorithm will