by Refundaroo | Nov 21, 2021 | Advice, Binary options
The classic 1966 spaghetti western “the good, the bad and the ugly” featured Clint Eastwood, Lee Van Cleef, and Eli Wallach as three gunslingers vying for hidden treasure. Like the film, algorithmic trading has its own versions of the good, the bad, and the ugly. Successful algorithmic trading can be highly profitable, but poor strategies can result in losses, and fraudulent manipulation can lead to severe financial harm.
Algorithmic trading, or “algo trading,” involves using computer programs to generate trades based on specific market variables like price, timing, and transaction volumes. Unlike humans, computers can process vast amounts of data quickly, respond instantaneously, and operate without breaks, 24/7. These attributes make algorithmic trading appealing.
It’s important to distinguish between algorithmic trading and automated trading systems. Algorithmic trading typically involves large trade volumes and uses rules to decide when to buy or sell, and it doesn’t have to be entirely automated. Automated trading systems, on the other hand, fully automate the trading process.
A specialized form of algorithmic trading, high-frequency trading (HFT), executes transactions at incredible speeds, aiming to make small profits across multiple markets. But is algorithmic trading right for you? Let’s explore the landscape to find out.
Types of algorithmic trading strategies
Initially, algorithmic trading was the domain of big corporations like pension funds and insurance companies, due to the high costs of developing algorithms, acquiring powerful computers, and sourcing real-time data. Now, individual investors can implement their own strategies or invest in algorithmic trading firms.
You can choose to invest short, mid, or long-term using various strategies. These include:
- Market trend-following algorithms: Buy when the price falls to a certain level, sell when it rises.
- Mean reversion: Buy when a stock is under its average price, sell when it’s above.
- Arbitrage: Buy and sell in different markets to take advantage of price differences.
- Other factors: Trade based on index fund rebalancing, trade volumes, timing and size of trades, share prices, and unusual market patterns.
Always ensure that algorithmic trading firms are fully registered, regulated, and licensed to have some legal recourse in case of any issues.
Pros and cons of different algorithmic trading strategies
Algorithmic trading offers numerous strategies, each with its own benefits and risks.
Pros:
- Speed and efficiency: Be the first to react to market trends.
- High volume, small gains: Profit from numerous small trades rather than a few large ones.
- Emotion-free decisions: Computers don’t suffer from emotional biases.
Cons:
- Technical issues: Power cuts or internet outages can disrupt trading.
- Algorithm flaws: Undiscovered flaws in algorithms can lead to significant losses.
- Market manipulation: Unscrupulous companies can rig the market or misinterpret trends, causing adverse effects.
Potential threats to overall market health
Algorithms are only as good as their programming and the data they process. Issues like incorrect programming, power cuts, or internet drop-outs can cause problems. Additionally, algorithms can cause market imbalances, massive losses, and failures if something goes wrong. For instance, investments in companies with hidden flaws (e.g., Enron or WorldCom) can become worthless despite being initially based on reliable data.
Can algorithms be manipulated to make a trader lose?
Algorithms can be manipulated to cause losses through various methods, including:
- Spoof orders: Orders placed and cancelled last minute to trick algorithms.
- Fake news: Artificially driving up stock prices with false information.
While such behavior may not always be illegal, it is often immoral. In rapidly moving markets, regulators and legislators struggle to keep up. Hacking and data breaches can also significantly impact algorithmic trading outcomes.
by Refundaroo Support | Sep 8, 2021 | Binary options
According to data from Action Fraud, binary options fraud accounts for an alarming $86,000 in losses per day in the United States. As the landscape of investment fraud evolves, the Financial Deposit Insurance Corporation (FDIC) emphasizes the importance of vigilance, particularly in the online realm.
Traditionally, individuals over the age of 55 have been the primary targets of investment fraud. However, recent findings from the FDIC’s ScamSmart campaign reveal a concerning trend: individuals under the age of 25 are six times more likely to trust investment offers received via social media. This shift underscores the changing profile of investment fraud victims, with under 50s being significantly more susceptible to binary options scams compared to other forms of investment fraud.
Fraudsters often leverage social media platforms like Facebook, Instagram, and Twitter to promote fraudulent investment schemes, promising high returns and showcasing images of luxury items to lure unsuspecting investors. Once funds are invested, these scammers manipulate prices, impose extreme payout clauses, and may even close customer accounts without refunding the invested funds.
Despite the risks, a notable percentage of individuals express trust in online customer testimonies and reviews, which fraudsters exploit by creating professional-looking investment platforms featuring fake testimonials and logos.
Binary options, known for their binary outcome of win or lose, became regulated investment products in the United States on January 9, 2008. This regulatory measure mandates that all firms trading in binary options must be traded on a regulated U.S. exchange. However this has yet to deter copycats and other fraudsters.
Refundaroo understands the devastating impact of falling victim to investment fraud. If you have already been caught up in a binary options scam, our team can help you navigate the recovery process. Our dedicated professionals are committed to assisting victims in reclaiming what is rightfully theirs. Don’t hesitate to reach out to Refundaroo for expert guidance and support.
by Refundaroo | Jun 9, 2021 | Announcement, Binary options
The Australian Securities and Investments Commission (ASIC) has announced an official ban on binary options for retail investors. This ban means that only professional investors or those with significant trading experience can access these financial instruments in Australia.
Reasons behind the ban
ASIC’s decision aligns with similar measures in other countries and follows an in-depth study revealing significant financial losses among Australian investors trading binary options. The research indicated that nearly a quarter of investors did not recoup any of their investments. Moreover, some investors ended up paying more in fees than they earned from trades, exacerbating their losses. The overall risk was deemed too high for most retail investors due to inadequate protections.
Reactions to the ban
Experts outside the industry have lauded the ban as a consumer victory, while some insiders worry it might drive the market underground or to unregulated areas where control is limited.
Key points
- Ban announcement: ASIC has banned binary options.
- Statement from ASIC: commissioner john price stated, “it is too easy for people to lose large sums of money through this type of trading,” citing risks such as fraud, market manipulation, and other criminal activities.
- Deadline for compliance: binary options providers must cease operations in Australia by march 21st or face fines up to $220 million.
- Investor protections: providers may be required to repay funds taken from Australians since October 2016.
- Assistance for investors: investors who lost money due to fraudulent schemes can contact ASIC at 1800 065 943 for help recovering their losses.
Understanding binary options
Binary option trading involves predicting whether the value of an asset (e.g., shares) will rise or fall by a predetermined amount. These options can be traded on various markets, including currencies, commodities, and stocks. Investors choose their investment amount and contract duration, ranging from 30 seconds to 12 months, and predict if the asset’s price will hit a specified level before the contract expires.
Risks of binary options
Binary options are risky because they offer substantial risks for small rewards. If an investor’s prediction is correct, they receive a fixed profit known upfront. However, incorrect predictions result in total loss of the investment. The high frequency of losing trades compared to winning ones can lead to significant financial losses.
ASIC’s rationale for the ban
ASIC aims to protect investors from the dangers of binary options trading, especially from unscrupulous brokers. The ban prohibits any company from offering or advertising binary option contracts in Australia, regardless of the company’s location. However, the ban does not extend to overseas markets like Nasdaq or NYSE ARCA.
Legal implications
The ban restricts brokers from soliciting potential investors via email, telephone, or social media, thereby protecting Australian traders from predatory business practices.
Recovering your investments
If you’ve invested in or lost money through binary options, you can take steps to recover your funds. Binary options are unregulated in Australia, so local authorities cannot provide protection against fraud. To find trustworthy companies, consult reputable sources like ASIC’s website.
Additionally, consider contacting a professional recovery company like Refundaroo, which specializes in investor recovery and support services for victims of investment fraud. With over 20 years of experience, Refundaroo can help you recover your lost investments.
Don’t delay in seeking help to recover your money. Reach out to Refundaroo today for your free consultation.
