The Machine Analogy, 11/15/09

The Machine Analogy - Trading Systems as Machines

Part of the allure of automated trading is the idea of a factory floor full of machines whose input is price data and capital and whose output is more capital, i.e., a money factory.

All those machines on the factory floor have tolerances and beyond those tolerances either output decreases, errors increase or both.

Trading systems are no different than mechanical machines and a large part of system design is determining tolerances and including automated governors that kick in when tolerances are exceeded.

Henry Carstens
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