Friday, June 11, 2010

Distorted Market Theory 1 - market memory

One of the assumptions of the Efficient Market Theory is lack of autocorrelaction between price changes, which is a result of market not having memory of its history.

However, millions of investors, and more recently "bots" or real-time trading algorithms created by the former, are looking for patterns in market data to profit from them.

In effect, these investors (and their "bots") are the market memory - both short and long-one.


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