Lots of people are blaming computers and so-called high frequency trading for the insane stock market fluctuations we've seen over the past week. But that's not quite right. Sure, technology is making the dramatic ups and downs possible, but the computer is a mere tool. Even since big investors stopped worrying about company fundamentals and became involved in technical analysis and tricky arbitrage strategies, the stock market fundamentally changed.
The Real Cause of the Problem
The problem with blaming big market fluctuations on computers is sort of like blaming guns for murders. As the saying goes, "guns don't kill people, people kill people." Similarly, computers don't cause crazy volatility, the people who operate and program those computers cause crazy volatility. This is evidenced by traders' love of technical analysis. David K. Randall from AP explains:
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