A large number of trades across the stock market these days is done in the blink of an eye between two automated algorithms, each calculating thousands of variables every second. The recent extreme volatility in rare earth metals is an interesting case that showcases what affects these instant trades have on the overall market. It is no longer good enough to classify market moves as pure hype trends or large player profit taking, there are other factors at play which all add to the beauty and chaos of the market, these factors can be categorized as follows:

– Real interest rate predictions.
These are constantly monitored by these trading bots, a minor change in predictions and expectations can lead to a huge wave of algorithmic sell offs.

– Future market positioning.
Further calculations are done in relation to the futures market expectations, these bots seek to position themselves for the highest probability of trading success and will perform hundreds of probability calculations per second.

– Currency positioning / Foreign Exchange shocks.
Jobs data, international exchange rates, and expected supply flows can all change the predicted outlook for the future price of rare earth metals. The highest levels of trading bots will factor these in at a moments notice.

Algorithmic trading can create huge market moves in response to relatively minor news events – But they only follow their own singular set of rules. This opens the pathway for a more social-centric method of investing, spotting the interpersonal and political trends that algorithms cannot. Learning to understand how these algorithms work and being able to invest alongside them may lead to greater investment success over the longer term.