Herd on the street

“Trading on inside information is illegal. 

Trading on other traders’ information is not illegal, though, and a new study from Northwestern University suggests that synching with other traders is a profitable strategy,”

The Boston Globe reports. “Researchers obtained data on all the trades made by all the day traders in one firm from September, 2007, to February, 2009.

Especially on days when there was high volatility, different traders tended to trade at the same time, as if they were synchronized.

Such synchronous trading was, in turn, significantly associated with profits.

The more a trader tended to move at the same time as others, the more money was made.

Perhaps they had found the pulse of the market.”

Source Globe and Mail
March 29, 2011

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