Many veterans have come to notice some problems with trading on the simExchange. No matter how strong the community feels, sometimes the price just doesn’t reflect what the community is predicting.
We continually see this with some overvalued stocks that are strongly shorted, but the volume of short trading just isn’t able to overcome the automated market marker’s wall of buy orders. Back on April 27, we saw news that appeared to shoot Red Steel (Wii) to 95 DKP. As discussed then, an automated market maker has no idea that news has emerged and the stock should be 100% higher than where it is currently trading. Traders would have to buy through each of the automated market maker’s pre-programmed orders to bring the market price to fair value.
Others have noticed that prices would rise on days when many new players join the simExchange and put new money to work. The automated market maker simply was not able to discern between informed trading and noise trading.
Additionally, it can be difficult to close out of positions after a stock stagnates. Buying 10,000 shares and then selling those 10,000 shares weeks later would bring the stock right back to where it was originally.
Some of you might be asking, “What is an automated market maker? And why is he the root of all these problems?” So you should know by now that in a stock market, you are buying and selling shares with other traders. However, when no trader is currently posting orders to sell, you would have no way to buy shares. In the real stock market, there are people who take the role of specialists or market makers who just post orders to buy and sell (this is called market making) all day long. They do this because they can earn a return by buying low and selling high. Notice that you do not buy at the same prices you sell at. You buy at the price the market maker wants to sell at and you sell at the price the market maker wants to buy at. The simExchange uses an automated market maker system that provides market making services in place of a human trader so that you can always buy and sell whenever you want--24 hours a day! However, automated market maker 1.0 just wasn't too bright and couldn't cut it.
We took a look at how to solve these problems, and we are proud to announce the brand new, patent-pending, more intelligent automated market maker. The new simExchange automated market maker better discerns informed trading from noise trading to provide more responsive price changes that are also robust from manipulated trades.
You can now close out a position over time and experience less price impact--meaning, if you sell off your 10,000 shares at 1,000 shares a day, the price will decrease a lot less than if you sold all 10,000 shares that day, getting you better prices.
We will be rolling out this new technology tonight. So when you wake up tomorrow and eagerly dash to your computer to play the simExchange, the new market maker will be waiting to trade with you for even more exciting trading action.