How Big Data Can Unseat Big Players in the Stock Market

Have you heard of Fibonacci trading? It’s an investment strategy based on the Fibonacci sequence. A stock trader who favors the Fibonacci ratios — a high volatility or low volatility Fibonacci trader —  will sell or hold their position based on the ratios. The interesting thing about this strategy is the way in which it mirrors nature, which is an anomaly. For whatever reason, nature decided to organize structures according to the pattern the Fibonacci sequence describes. In turn, traders can base their strategy on a mathematical anomaly that corresponds with nature.

Here’s the thing: before day traders could take advantage of advanced automated trading software, a trader who tried to manually employ the Fibonacci ratios was at the mercy of their own emotions. At times when a Fibonacci-based strategy is working, manual day traders can fall prey to either the gambler’s fallacy or the hot-hand fallacy. They can decide it’s time to change strategies because of the basic logical errors to which humans are prone. Now, automated trading removes the emotional irrationality and makes it possible for small-fish traders to employ multiple strategies at the same time.

In short, humans can tend to have a bias towards a strategy like Fibonacci ...


Read More on Datafloq