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Strategies & Market Trends : ajtj's Post-Lobotomy Market Charts and Thoughts
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ajtj99
roto
To: roto who wrote (95726)10/11/2025 12:37:04 PM
From: Sun Tzu2 Recommendations  Read Replies (2) of 96636
 
There are *a lot* of people doing algorithmic trading and using AI to improve the trades.

And my take is that they will work for a while, but not for long.

The problem is that because a lot of people are searching, the space and the algo gets crowded and when that happens it stops working.

This is not a new thing. Pros in Wall Street have known this for decades.

For example, I remember a time that stochastic indicator and MACD were new. The head trader in Morgan Stanley used to give photocopies of his hand drawn stochastic with his notes (yes, this is how it was. Computerized real time stochastic indicator wasn't available yet). Once everyone learned about the indicator and every trading application offered it, it stopped being effective as a predictor and became a reflection of the past.

As another example, D.E. Shaw used to trade one-fifth of the NYSE. Think about that! A fifth of all trades were done by one firm. However, Shaw himself pointed out that he was unable to accept new funds until he develops new algorithms because his own trading was making the market more efficient and he had hit the wall. The fact that his trading volume as a percentage of the total is now substantially less than its peak tells you that others also discovered those algorithms.

So the claims may be legit. But the past is no guarantee of the future returns. There's no substitute for evolving with the markets.

The other issue is what ajtj alluded to. His algo may work for a limited subset of the market which will not scale once he sells subscription. This is a different way to restate the above, but it's specific to the market segment.
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