Regarding the age of volatility that we are now in - what causes volatility in the first place?

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#1 Sat, Oct 22, 2011 - 2:54pm
lilbromarky1
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Regarding the age of volatility that we are now in - what causes volatility in the first place?

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For 3 months the Dow chopped around in a range. Before finally closing above 11,600 on friday. My question is, what would make it chop within a certain range for that long a period of time? I can't imagine that would be a chart pattern exhibited by human traders. Humans are chaotic and random.

Is it possible that there are govt sponsored teams out there who's job it is to make sure the dow doesnt fall below a certain level? I picture an infinite govt/fed sponsored bank account attached to a computer that is programmed to buy certain stocks whenever the dow reaches a critical low point. Is this a realistic notion?

Edited by: lilbromarky1 on Nov 8, 2014 - 5:03am
Mon, Nov 14, 2011 - 12:54pm
lilbromarky1
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No takers?  Am I asking too

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No takers? Am I asking too many questions?

Like my ideas? Check our blog at: https://backtobasicseconomics.blogspot.com/
Mon, Nov 14, 2011 - 2:39pm
CYM
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It is my opinion that all

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It is my opinion that all markets are manipulated, the only difference is the extent to which they are manipulated. I do NOT think there is a gov't team assigned to maintaining the DJIA, however.

What causes the volatility? Fear and uncertainty of investors... These are uncertain times and investors just can not predict (with any confidence) where the markets will be next week, let alone next year.

Ambiguous answer, I know, but that's all I've got.

Mon, Nov 14, 2011 - 6:05pm (Reply to #3)
Roberto
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Computerized high frequency

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It isn't humans, it's computerized high frequency trading. Most of the algorithims make the exact same moves.

Tue, Nov 22, 2011 - 3:55pm
lilbromarky1
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Okay so we have 1 answer for

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Okay so we have 1 answer for humans and 1 for non humans

If it was humans, why would the market cycle up and down or "chop". What human in his right mind, paying fees every trade would sell and buy the same thing back every day. Only an idiot, or a really smart computer. I'm going with computer.

Like my ideas? Check our blog at: https://backtobasicseconomics.blogspot.com/
Sun, Dec 4, 2011 - 8:43pm
CYM
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Who controls the computers?

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Who controls the computers?

Thu, Jan 5, 2012 - 6:36pm
lilbromarky1
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*Buzzer

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*Buzzer Sound*

Ohhhhhhhhhhhhhh I'm sorry those answers were good but the correct answer we were looking for was "Increased leverage leads to increased volatility". You see, there's not very many players left in the game. Volumes are thin. So any move by a highly leveraged investor causes a greater disruption than it would have otherwise without the leverage.

Like my ideas? Check our blog at: https://backtobasicseconomics.blogspot.com/
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