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Do Human Investors Need to Beware of the Rise of the Machines?

The Algo Effect - watch the video to understand how algorithms move the market.

Algorithmic and quantitative investment solutions have come under fire of late from many in the investment community, as traders bemoan outsized price moves and swings on headline word triggers.

"The evolution of price discovery, where not only the algorithms -- that we all complain drive price more than anything else, along with artificial intelligence and high-frequency trading...[and] "word triggers" now drive price," Stephen "Sarge" Guilfoyle said in his column on Monday morning. "All of these later-day impacts to the way price is discovered really fall under one bundle, and have truly changed this game to the point where the market does not necessarily do what many think it might."

He suggested that algorithms are "perverting" the logicality of the market.

Nonetheless, these strategies are taking over the asset management industry. According to Statista reports, the assets under management of these firms are suspected to grow from an already impressive $540.6 billion to over $2 trillion by 2022.

To learn more about how exactly these strategies move the market, Real Money had a chat with Petra Bakosova, COO of quantitative asset management firm Hull Tactical.

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"We gather a whole array of macro variables, fundamental variables, technical variables, and sentiment variables," she explained.

To hear more about the myriad of variables, specific stocks that algorithms are being triggered on, and how human traders should react to the algo effect, check out the video above.

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