PROGRAM TRADING is often confused with computers.
It is true that the use of computers are in fact used to execute the trades, and they are
executed at a rate much higher than would be possible to do without the use of the
computers. However, the term "program" refers to "basket" of 15
stocks or more that are being traded on one ticket, or program. |
A trader will create a "collection of different stocks in one
basket", (a program), and trade that as one trade. In addition to this one
trade executing several stocks very quickly with one trade order, it is done with the use
of computers thereby creating an even faster moving market. The use of the computers
to execute the trades further complicates the separation of the word "program",
but the computer itself is not what the term program refers to. |
When a trader places a program order and flushes the entire basket of
stocks, there may be stocks in that basket that he would have preferred to hold, but could
not separate it from the others. Often a particular stock will fall during wild
market fluctuations when the stock really had no reason to be selling off. The
excuse will later come to bear that it was due to the "program trading" which
also caused the market curbs
to be activated. |
|