The Story Behind The Global Stock Market Crash And Boom

For the first time, the sharp rise and fall of global stock markets have become normal.

First, China's stock market soared before June, and the Shanghai composite index plunged from 5178 to 2850, with a drop of 46%.

The sudden devaluation of the renminbi immediately triggered a huge concussion in the stock market, foreign exchange market and commodity market in the global market.

Finally, the global stock market crash was detonated in August 21st, and the US Dow Jones index fell 1879 points in the 6 trading days.

Then the two pactions rose by nearly 1000 points.

Private placement network data show that this year, the top five of the proceeds of the program trading futures private placement is brilliant, one of the futures private placement of a product yield even more than 800%.

The IPO prospectus, the world's leading electronic trading company Virtu (its main strategy is high-frequency trading), once wrote: 1238 trading days, only one day of loss.

Public figures show that in Wall Street, high-frequency trading companies earn an average annual yield of more than 60%.

That is to say, with this kind of stylized paction, the financial market can not go anywhere.

But in a zero sum game financial market, where does the profit of this invincible programming come from? Why do they like the skyrocketing and tumbling of the market? Why can they create a sharp rise and fall in the financial market? This is a matter for Chinese regulators and investors to pay close attention to.

The German stock market rose 1.7% yesterday and the French stock market gained 2.4%.

Japan's Nikkei index jumped 7.7%, the Shanghai composite index rose 2.3%, Hongkong's Hang Seng Index rose 4.1%, and Taiwan's stock market rose 3.57%.

Singapore, Australia, South Korea and other stock markets have soared.

The stock market panic index dropped by 8.15% to 22.87 yesterday, which is close to the level before the August stock market crash.

In recent months, why has global stock market surged and plummeted? Apart from the reasons why China has some particularity with other countries, it may be more related to the current global stock trading system and trading mode, but not closely related to the economic situation or macro background of other countries.

For the explanation of stock market fluctuation in the past, the general traditional theory holds that the stock market is a barometer of the real economy, to a large extent, related to macroeconomic changes.

But many economists later believed that the sharp fluctuations of the stock market were largely related to irrational factors.

Samuelson, an American economist, thinks that

The fluctuation is stronger than that of GDP.

Therefore, the collapse of stock market prices does not necessarily indicate that the real economy will decline, and more importantly, people's emotional role.

Because the stock market is naturally a volatile market, it is easy to be irrational and optimistic, leading to a stock market bubble.

Similarly, Keynes's view is the same.

Because investors in the stock market tend to act on fantasy, emotion and luck.

But these traditional wisdom or opinions are not convincing enough to explain the reality.

In modern European and American stock markets, fundamental changes have taken place in the trading rules, trading modes, trading procedures and trading principles of stock market.

Currently, stylized pactions are very popular in European and American stock markets.

These stylized pactions account for over 70% of volume in the US stock market and over 40% in European stock markets.

In the financial derivatives market, such stylized pactions should be more prevalent.

In just over 10 years, these new speculators have completely controlled the financial market.

Generally speaking, procedural trading refers to the process of generating trading signals based on a certain paction model and automatically executing paction orders by computers, including algorithmic pactions, quantitative pactions, and high-frequency trading.

The advantages are mainly reflected in homeopathic operation, earning band profit; simple instruction, clear strategy, eliminating man-made greed, improving paction efficiency and enriching market liquidity.

That is to say, the biggest characteristics of stylized paction are the following aspects.

First, the irrational sentimental factors of the traditional stock market trading decisions are completely eliminated, which is completely completed by the rational logic of the computer programs that have been designed, or completely.

。

Therefore, the current stylized paction is totally different from the irrational factors of Samuelson and Keynes.

Two, this kind of stylized paction is not only very fast in operation, it can easily incorporate more factors that may affect stock market volatility into the calculation model.

That is to say, in today's big data era, this kind of computer program can search at high speed, and incorporate all relevant information found in the stock market to the calculation model.

For example, if there is a certain correlation between the climate change in a country far from Africa and the rise and fall of the stock market, the model will be able to take account of this factor.

That is to say, the information completeness and quick reaction of stock market trading decisions.

The three is that such stylized pactions can be carried out at the speed of light, which can surpass the limits of human beings. Their algorithms continuously and automatically search for trading opportunities in the market, capture trading profits in a few milliseconds, and manipulate the market at the same time.

That is to say, this stylized paction is entirely possible to circumvent the existing regulatory regime and mode.

At present, the global regulators do not know what is happening in this paction, and the technology of financial pactions takes the place of its scientific nature.

That is to say, from the characteristics of modern stylized pactions, any new market information will change its trading price and trading mode.

And these changes can be accomplished in an instant or without feeling.

These market information can easily lead to positive feedback or negative feedback from market prices.

That is, the forward market information keeps pushing up the stock market and causing the stock market to skyrocket; negative information keeps pushing down the stock price, causing the stock market to plummet.

The stock market is like this, as is the case in other financial markets such as foreign exchange and commodity markets.

So the devaluation of the RMB, the stylized paction model is understood as the negative factor of China's economy, and the Chinese government's introduction of loose monetary policy is also understood as the positive factor of the market.

How can the global financial market not skyrocket? This is the fundamental reason for the sharp rise and fall of the global financial market.

It is also the best profit making conditions for these stylized pactions caused by the sharp rise and fall of financial markets.