Wall Street Wants Predictors
Also stock buyback bans and memecoin rug pulls.
There are two basic ways to use computers to trade stocks:
These things bleed together; a human market maker at a big bank, or an electronic market-making algorithm at a big electronic trading firm, will probably have some notion of fundamental value. It is possible to do market making or arbitrage with no concept of fundamental value, but in a competitive market it is hard and risky. If you are buying a stock at $29.99 and selling at $30.01, and some well-informed investor knows that it’s really worth $40, she will keep buying from you at your price and you will lose a lot of money. (This is called “adverse selection.”)