redbacka

Hi, From Bill Williams book (I've paraphrased): Path of Least resistance 1. if selling has decreased on any down-move, the market will then want to go up (No selling pressure) 2. If buying has decreased on any up-move, the market will want to fall (no demand) Bots are working out the path of least resistance. They are working out whether or not there is selling or buying pressure. When they find selling or buying pressure, they go with the flow. A bot is not a market maker with that person's knowledge of supply and demand on their books and where the stops are. But the Bot uses the much the same principles as an off-the-floor professional uses to determine where the Supply and Demand levels are. The Bot doesn't "see" anything the way a Professional sees it. But discovers where things are by actively probing. The bot is programmed to test to find where supply and demand levels are. When they've found them, they then go with the flow. When a bot ticks up or down - it does so on extremely low volumes, often of only one share per sale or purchase. Again from Bill Williams' book: lack of demand is pretty easy to pick out. Basically, you will be watching out for a low volume up-bar, on a narrow spread ... So a bot, looking for "supply" will tick up perhaps a small series of narrow-spread low-volume up-bars ... and keeps doing so until supply kicks in. It then sells into that supply. etc., etc. Cheers Red

In the long run, No I don't. The principles programmed into HFT Trading Machines are the principles used by Market Makers and other Professionals. What "Bots" do is carry out a series of market "tests" to determine supply and demand. If the Bot ticks down on low volumes, it is testing to find where demand enters the market. When they discover demand, the Bot then bites and takes a large chunk. When the Bot is ticking up, again it is testing the market to find a level at which supply enters the market. The Bot then sells into that supply level. Now - if you're a short term trader, you may not be fast enough to go along with whatever the "Bots" are discovering. So - it's probably not worth entering that pool of trading. But - in the long term, the Bots have little discernible effect on the direction of the market. Unfortunately, people confuse cause and effect. People see the Bots ticking down, and jump to the conclusion that the Bots are "causing" the market to fall. The market can only fall if there is no demand. Bots are designed to discover market conditions and then to take advantage of market conditions. That's exactly the process that Market Makers and Professionals have used for eons. The Bots do it much more quickly. Cheers Red