Norway’s Day Traders Take on the Algos# Stock
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Nearly 40 percent of all share orders in Europe are sent by algorithmic
trading computers, up from just 20 percent five years ago, according to the
Tab Group, a capital markets constancy. In the U.S. the figure is 37 percent.
Yet despite the prevalence of these supposedly smart machines, some traders
are making a tidy profit getting the better of these systems, which can make
costly mistakes if they are not set up correctly or if their trading
patterns can be understood.
Send Emil Larsen, a Norwegian day trader, worked out in 2007 how the
computer algorithm of Timber Hill, a unit of US-based Interactive Brokers,
would respond to trades in certain illiquid stocks. The stocks would change
price in a uniform way regardless of how much was bid.
He found that he could bump up the price with very small trades and then
sell with much larger trades for a profit. He was not the only trader who
worked out this flaw, which he called “painfully obvious.” But he still
made $50,000 in a few months.
trading computers, up from just 20 percent five years ago, according to the
Tab Group, a capital markets constancy. In the U.S. the figure is 37 percent.
Yet despite the prevalence of these supposedly smart machines, some traders
are making a tidy profit getting the better of these systems, which can make
costly mistakes if they are not set up correctly or if their trading
patterns can be understood.
Send Emil Larsen, a Norwegian day trader, worked out in 2007 how the
computer algorithm of Timber Hill, a unit of US-based Interactive Brokers,
would respond to trades in certain illiquid stocks. The stocks would change
price in a uniform way regardless of how much was bid.
He found that he could bump up the price with very small trades and then
sell with much larger trades for a profit. He was not the only trader who
worked out this flaw, which he called “painfully obvious.” But he still
made $50,000 in a few months.