"I read on another thread on this board that most of the more experienced, consistently profitable traders (a lot of which post here) make most of their money from the newer daytraders" IMO that's non-sense. Major portion of money come from the biggest liquidity providers in the markets (Mutual funds etc.) Damn, just use the common sense. How can (I don't know how many) millions of profits come from bunch of guys with $10,000 accounts??????
I haven't done the math on it...like I said, I read it here. I can find the link if you like, I don't know if it's true or not. I will say there are a lot of guys with 10K accounts who lose most of it and a few guys with million dollar accounts. Given the stated odds of some recent articles (better than 90% of the daytraders go under), then if only daytraders were out there, the numbers would roughly make sense.
I do not know the exact numbers either. But it's a matter of fact that daytraders account for only 10-20% of trading volume. In the same way, the floor traders (for the most part) do not make money off each other. If you say successful daytraders make money off less successful daytraders it's like to say floor traders in the pit make money off each other. That's not the way it works. If they were trading among themselves only, most of them would neither lose or make any money over the long run. True, there is some turnover, but from experience, most of the guys are there year after year. I don't doubt you have read it somewhere. But it's the same with all the books on trading. 10% have value, 70% are useless, rest is garbage.
beyond daytrading, maybe you would find this interesting, from G. Soros. http://www.soros.org/textfiles/speeches/042694_Theory_of_Reflexivity.txt
Agree with Cesco 100% you'll often hear about how a market didn't develop because locals, MM's, or day traders, couldn't facilitate institutional interest. Baloney! serious individual traders make their money off large institutions i.e. short time frame opportunities vs. long time frame participants. While us little guys pick each others pockets in the ES, the true price discovery is funds going agaist locals in the pit.
I think most profit is had by getting in the middle of inefficient trades by large funds. Those guys are trying to predict stock prices much further out and slippage that strikes a daytrader as substantial doesn't mean as much to them. Besides, most of them don't beat the s&p anyway so they ain't all that hot. Not to say that daytraders don't contribute to the mix. As we all know, most fail. But it seems to me to be peanuts compared to what those big guys are slingin' around. mike s
I believe most to the easy trading on the NYSE comes from mutual funds giving larger orders to the floor brokers who then use various strategies to get the size done. Ever wonder why the market was ripping and someone put size up just so that you could get into a sitter type trade. Do you think it was a dumb daytraders, I say rarely. I believe it is brokers getting trades done just trying to beat the VWAP and happy to do size at that price even if on the short term it seems like they are giving away stock. I think that for the last 2 to 3 months in general no funds were trying to do much size-- so sitter trades were usually not available. Lately, I have been finding some obvious trades so I think some of the funds are starting to move again. I hope the herd instinct comes back. I just read the begriming of the quote above and realized I was agreeing with so really I would just emphasize I think that frequently our profits in directional markets come from the VWAP traders on the other side of the trade.