Impact of Trading Bots on Market Behavior

With bots increasingly taking over stock and crypto trading, it's worth looking at their effects. They don’t feel fear or greed like us humans. Instead, they act based on expected outcomes. If they see a potential rise, they buy. If they think it’s going down, they sell. But their timing usually hinges on specific parameters they use, like news or institutional signals. What happens when the floor increases but the ceiling stays the same?

Thanks for the response! I totally agree with you on most points. Bots do eliminate emotional factors, and they react so much quicker than we can. But isn’t speed the key factor here? If a stock bounces up and down fast, you need to be quick to catch the changes. Buy in late, and you end up losing money. But yeah, I’m on board with your idea about bad bot designs being a real risk.

Bots I’ve encountered are kinda limited. They don’t make decisions on their own; they simply stick to their programmed strategy. If a trader chose the wrong strategy, that’s on them, not the bot. Like, if your bot was designed to take advantage of market volatility and then it crashes, well, that’s your loss. It’s like playing poker with a cheater who shows all their cards.

From your point, it seems like market movements could become super predictable eventually. But would that really turn me into a trader? I doubt it. Real life isn’t that straightforward. For example, if there’s a major geopolitical event like a US strike, we might expect the market to drop, but how much really? And if peace talks happen, sure, the market might go up, but predicting that isn’t easy.

I get your point about news influence. Still, I think the charts reflect traders' beliefs more. Some bots act purely on chart patterns, not caring about real-world events, which creates those predictable patterns. They expect a rise based on the chart, they buy, so the price goes up. But yeah, real-world events can still mess with cryptos and stocks.

Looking at forex might give us some clues. Can’t believe there’s no bot usage there! It’s been around longer than crypto, so there’s gotta be data showing how the market shifts. Even if it becomes more predictable, I doubt the market shrinks because more people will dive in. Humans can still mess things up no matter how well a bot works. In the end, it’s probably the top 10% who master the self-fulfilling prophecy.