This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Software Is a Trader, So Be an Investor

NEW YORK ( TheStreet) -- One point the acquisition of New York Euronext (NYX), owners of the New York Stock Exchange, by the Intercontinental Exchange (ICE - Get Report) demonstrates is the final triumph of software in the trading of stocks.

But is there a way to make money off that?

One thing I've noticed this year are trades that have gone against the expected trend. Conventional wisdom compares this with trying to pick up pennies in front of a steamroller, as the FXCC blog notes, but software can always get out before the steamroller gets there. You can't.

I think that even if software isn't that clever, trading against a trend in a cash market can be a good trade for software. Consider a situation where software has a lot of options running the wrong way in a trend. Trading in the opposite direction, in the cash market, may give software the time to unwind those trades without loss. If the trend is of short-term duration, software can trade out of the cash positions later while maintaining principal.

Again, you can't.

With options increasingly driving the train, I expect this trading against the trend to continue, even accelerate. It means cash traders need to hold on a little longer for the expected to happen, but it means that what looks like a market running against you may also be a mirage, machines trying to panic you.

A great example of machines taking advantage of human panic came this year with Facebook (FB - Get Report). When there seemed to be trader momentum for it going up, it collapsed. Later in the year, when everyone had turned bearish, the stock started rising. All this was absent real news. Trading was done on the basis of rumor and daily news stories.

It's in cases like this that people get emotional and machines rational. The machines cleaned up on Facebook and they're cleaning up still.

The same has been true with a lot of other widely-traded tech names this year. (AMZN - Get Report) seemed to be driven higher without any news to justify that. Apple (AAPL - Get Report) seemed to have been driven lower, also without news. Right now Google (GOOG - Get Report) seems capable of doing nothing wrong.

Are the machines trying to tell you to sell?
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
NYX $0.00 0.00%
ICE $240.03 0.00%
AAPL $93.74 0.00%
AMZN $659.59 0.00%
FB $117.58 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs