A great talk on algos and how they are shaping the financial markets in many ways surprising to most people.
The talk was done back in July 2011. Notice that the algo driven behaviour in financial markets has evolved even more surreal over the past few years.
Normal people assume things. Most people assume that they cannot compete against the bots. That’s true. Competing against the bots in their domain, speed, is a very stupid thing to do. But there are other ways to beat them just like any financial markets ever existed since thousands of years ago.
The bots are the crowd now. They are the stupid ones.
The micro structure of the most popular financial markets are getting more and more predictable as these algorithms in aggregation reinforcing their rule-driven, mechanical decision makings. Boldly speaking, I find this environment easier to trade than ever. Just accept the game as it is and look at it objectively. You will find recurring patterns everywhere that are exploitable.