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April 10, 2020 | Price ‘Circuit Breakers’ Reveal how Price Discovery is Manipulated (daily)!
Don Swenson
Dynamic price ‘Circuit Breakers’ (DCB) monitor for significant price movements during a trading session. DCBs define an upper and lower limit of how far an instrument (say gold) is allowed to move in a configured time interval. All this is accomplished via computer algorithms. Historical human price negotiation is no longer valid. All price movements are now done via the computer and the use of programmed ‘algorithms’ determine our prices.
Each product (say gold, silver, oil, etc.) has its own assigned percentage used to calculate its Dynamic Circuit Breaker variant, which is a percentage value of its previous settlement price. This calculated variant is used through the course of the trading session. The gold futures contract has been changed from a 5% price limit to a current 10% price limit per rule 589. An algorithm can monitor, change, and stop trading if necessary. Given these changes, we could witness some upward bias for the gold price going forward. Manipulation, however, is still a reality!
A video on this concept called ‘circuit breakers’ is here:
We need to recognize that price discovery (today) is a function of algorithmic trading. Algorithms trade at near the speed of light and this software (an algorithm) programs a trade for our markets. Prices fluctuate within cyberspace (the computer screen) as algorithms trade our markets in real-time. Algorithms do not obey historical supply/demand as they can trade a commodity, exit the trade, cancel the trade, and/or settle a trade (in virtual dollars).
Gold is a commodity which should be traded as a physical product. Today, however, traders can trade gold as an ‘imaginary’ product and settle a trade without any delivery of the commodity. This makes no sense (economically) but this is what happens in our corrupt digital futures markets (like the CME Globex Exchange). See the process here: https://www.cmegroup.com/trading/why-futures/welcome-to-comex-gold-futures.html.
To further understand trading in today’s manipulated markets you might like this video. The presenter understands how our corrupt trading system works:
We now live with manipulated electronic markets and our central planners (the central banks) have control over the system. This means that historical Capitalism is over. We now live with central planning. America’s central bank (the Fed) working with America’s Treasury Department rule over all finance today. As I write, Mr. Jerome Powell, Fed Chairman, and Mr. Steven Mnuchin, Treasury Secretary, are the key policymakers. Mr. Trump is also fully involved in any decisions which determine our economic future. It’s time to learn about our machine driven markets. Financial survival depends upon understanding what has evolved these past 20 years. Have a good day!
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Don Swenson April 10th, 2020
Posted In: Kingdom Economics