How Healthy Is Your Machine Learning Model? - Analytics India Magazine

Traders follow a simple motto: buy low and sell high. But when the opposite happens, the stock market goes berserk. On a fine morning in 2012, the NYSE had to step in and cancel numerous trades due to erroneous trading by Knight Capital which saw the biggest drop ever since it went public. Instead of at least attempting to provide liquidity via limit trades, Knight's algorithm acted as a market order. Naturally, when the entire logic of trading was perverted courtesy of Knight's busted algorithm, everything went chaos, and stocks went higher because they went higher, and the higher they went, the greater the incentive for the algorithm to keep pushing the stock higher.