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Author Topic: A phony tweet and computer trades sink stocks: the dangers of automated trading Back to Topics
RNorm

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San Bernardino

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Message Posted: Apr 25, 2013 8:12:04 AM

"For a few surreal minutes, a mere 12 words on Twitter caused the world's mightiest stock market to tremble.

No sooner did hackers send a false Associated Press tweet reporting explosions at the White House on Tuesday than investors started dumping stocks — eventually unloading $134 billion worth. Turns out, some investors are not only gullible, they're impossibly fast stock traders.

Except most of the investors weren't human. They were computers, selling on autopilot beyond the control of humans, like a scene from a sci-fi horror film.

"Before you could blink, it was over," said Joe Saluzzi, co-founder of Themis Trading and an outspoken critic of high-speed computerized trading. "With people, you wouldn't have this type of reaction."

For decades, computers have been sorting through data and news to help investment funds decide whether to buy or sell. But that's old school. Now "algorithmic" trading programs sift through data, news, even tweets, and execute trades by themselves in fractions of a second, without slowpoke humans getting in the way. More than half of stock trading every day is done this way.

Markets quickly recovered after Tuesday's plunge. But the incident rattled traders and highlighted the danger of handing control to the machines. It also raised questions about whether regulators should be doing more to monitor the relationship between social media and the markets."


Experts say the fake tweet seemed designed to catch a computer's attention.
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jayrad1957
Champion Author Los Angeles

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Message Posted: Apr 25, 2013 3:17:33 PM

FB can be quite entertaining. Amazes me how much time some people spend on FB daily. A huge waste of time IMHO.

[Edited by: jayrad1957 at 4/25/2013 3:18:03 PM EST]
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teacher_tim
Champion Author Maryland

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Message Posted: Apr 25, 2013 1:19:40 PM

Agreed RNorm,
Instant communication can be both a blessing and a curse, though. Many things should be thought through before instantly sending them out to the world.LOL
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RNorm
Champion Author San Bernardino

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Message Posted: Apr 25, 2013 12:40:06 PM

"But I do laugh at people that change their picture daily. I also keep a few friends on there for comedy relief. You all know the ones...the ones that live their every moment on their and air all their dirty laundry."


LOL, I know some of them...the ones that have full blown fights over stuff that should be private. SMH

But you can't beat twitter for breaking news (when the news site hasn't been hacked).

Interesting note, I started using twitter because I read about a guy who was in egypt and got arrested, although he was doing nothing, but he was able to send out a tweet before the authorities took his phone and other personal effects and it was that tweet that got him and his interpreter freed, because someone was alerted to what was happening and was able to get people over here involved before he got lost in that system...That showed me the power of twitter and how effective it can be when used in the right way.
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AFSNCO
Champion Author Montgomery

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Message Posted: Apr 25, 2013 12:29:30 PM

Norm, I use both but I only use FB to keep in touch with my numerous friends from around the world. I rarely change my profile picture (mine is currently me from my retirement ceremony with my 2 kids and that was almost 18 months ago...LOL). But I do laugh at people that change their picture daily. I also keep a few friends on there for comedy relief. You all know the ones...the ones that live their every moment on their and air all their dirty laundry. They make me feel better about myself!

As for twitter...is really handy during the NFL draft this weekend and also near the MLB trade deadline.
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RNorm
Champion Author San Bernardino

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Message Posted: Apr 25, 2013 12:25:18 PM

"On another note, Twitter, Facebook, et. al. is part of the problem, a collection of narcissistic people measuring their self worth on the quantity of others to listen to their drivel. "


I can't say the same for FB, but Twitter is a great resource for news and information. I use it daily, and I saw the tweet in question, but since I didn't see other news tweets reporting the same, I knew it was a fake in less than a minute...Its too bad computers can't do the same type of simple reasoning.
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EZExit
Champion Author Phoenix

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Message Posted: Apr 25, 2013 11:30:56 AM

Zim: <<<"One would think false news of an attack on Obama in the White House would have made stocks go up, since all the cons seem to think he is harmful to the economy.">>>

*********

They probably have written into the computer code that Biden would assume office in the event of Obama being unable to continue, thus the reason for the sell off.

On another note, Twitter, Facebook, et. al. is part of the problem, a collection of narcissistic people measuring their self worth on the quantity of others to listen to their drivel.



[Edited by: EZExit at 4/25/2013 11:37:31 AM EST]
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Zimcity
Champion Author Twin Cities

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Message Posted: Apr 25, 2013 10:52:23 AM

"Good thing the economy is doing so well that the stock market hits new highs, right RNorm? Good thing everyone put their money in it in an effort to make SOME kind of return, because the long-term prognosis is SO wonderful that really everyone should be investing in bonds, particularly government bonds."

One would think false news of an attack on Obama in the White House would have made stocks go up, since all the cons seem to think he is harmful to the economy.
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RNorm
Champion Author San Bernardino

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Message Posted: Apr 25, 2013 10:51:50 AM

"Fools trade based on tweets."


LOL, but in this case the "fools" are computer programs...
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gocatgo
Champion Author South Carolina

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Message Posted: Apr 25, 2013 10:49:10 AM

Tim, please note nowhere in the topic heading is the word "Economy" found.

Se.5, "fools trade based on tweets", well said.

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teacher_tim
Champion Author Maryland

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Message Posted: Apr 25, 2013 8:38:37 AM

Good thing the economy is doing so well that the stock market hits new highs, right RNorm? Good thing everyone put their money in it in an effort to make SOME kind of return, because the long-term prognosis is SO wonderful that really everyone should be investing in bonds, particularly government bonds.
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SE3.5
Champion Author Indianapolis

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Message Posted: Apr 25, 2013 8:31:22 AM

Twits tweet. Fools trade based on tweets.

That said, I agree that automated trading should be banned.
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