I’ve been chewing on something that I think explains a lot of what we’ve been seeing lately.
When the market makes a move that borders on absurd, your first instinct is probably to ask, “What are traders thinking?”
But the truth is, these swings have reached a point where even calling them irrational feels too polite.
At times it’s moving like a penny stock — a 300 point drop in the indices in four days is crazy — and that kind of behavior hints at something deeper than simple human overreaction.
Here’s the thing: I don’t think it’s traders at all anymore.
The AI Trading Reality
My biggest suspicion is that there’s a lot of AI algorithms out there trading the news. Not people sitting at a desk clicking a mouse.
Not fund managers making a call. Just code, running nonstop, reacting to headlines faster than any human ever could.
These algos are driving things a lot of the time when the moves look ridiculous, especially during geopolitical noise or sudden developments.
A perfect example was the surge that instantly reversed when a single comment changed the tone — the kind of moment where a “Trump pump” got anti-pumped the second talk of retaliation hit the air.
One helicopter goes down, a headline flashes, and the market tanks.
That’s not analysis. That’s automation.
And whoever programs these systems gets to decide what they look for. They don’t care about fundamentals. They care about keywords, triggers, and whatever logic some coder wrote into a black box months ago.
What This Means for How You Trade
If you’re trying to make sense of every tick by asking why a rational trader would make that move, you’re asking the wrong question.
The reality is that the market has become a mechanism of transferring wealth from the impatient to the patient, and you have to trade with that in mind.
That’s why I keep my position sizes modest and my timeframes flexible. When the market can gap against you on algo-driven whiplash, you build your plan around that risk.
If you’re playing anything besides roughly three-month options, you’re going to feel the pain much more intensely. Short-dated options get shredded because these moves are so violent.
We’ve even had stretches where the statistical extremeness is off the charts — like having a massive, high-velocity distribution day on Friday and another one Wednesday. Two of them in the same week.
Moves that should basically never happen under normal market expectations.
And look, even seasoned traders get blindsided. It still takes me by surprise how fast these moves happen.
When the market behaves like a black-swan factory, everyone feels it.
I’m not saying every move is algorithmic. But when something doesn’t make sense, that’s probably your answer.
Once you accept that, you stop trying to rationalize the irrational and start trading what’s actually in front of you.
Geof Smith
Geof Smith Trading
Follow along and join the conversation for real-time analysis, trade ideas, market insights and more!
- Telegram: https://t.me/+lm8_Nq3Su104NmFh
- YouTube: https://www.youtube.com/@FinancialWars
Important Note: No one from the ProsperityPub team or Geof Smith Trading will ever contact you directly on Telegram.
*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
P.S. Wall Street’s Dirtiest Secret Yet…
I recently began sharing a secret report with my tight circle of buddies about hidden orders from Wall Street that send stocks higher within days…
Disclaimer: The trades expressed today are based on signals from the Sleeper Cell Scanner with the benefit of 20/20 hindsight unless otherwise stated. According to a backtest of 64 years of data dating back to 1962, the signals pulled by the scanner would have been 81.9% accurate on over 7,300 trade signals… No strategy is perfect, and wins are not guaranteed. There are bound to be winners and losers along the way. Since the Sleeper Cell Scanner is a tool for traders and not a trading service, profits and performance will vary among users.
