I am wondering what others think about program trading and what place it will have in the markets in the future. I am a scalper with a simple method looking at the book and picking up 1-2 ticks on the trade and risking no more than 1 tick. It is simple but requires a lot of descretionary thinking throughout the trading day. I pretty much just take what the market gives me and adapt day to day. With automated trading rising so quickly over the past years and accounting for over half of all trades on the NYSE (not that I trade stocks I mainly trade ES) what is the future for manual traders like me? Will futures be as heavely automated as the stocks? It bothers the hell out of me thinking that a machine can do the exact same thing that I can do everyday even possibly better. Will automated trading simply take over and manual traders will have to create automated systems or find other jobs? Or will we both compete for profits in the future and trades are done about half manual half by programs. Or do you think that most programs will eventually die out and everyone will move back towards manual execution in the future? If you ask me I think that the programs need to be regulated by the exchange because they are like the specialists/floor traders they have an edge and they can manipulate the markets by pulling orders at the last second and such. I know you guys have heard people talk about this subject before but being a young man with college to think about in the future I want to make sure that I am making the right choices and getting the right degree if automation is the key to the future. I just don't want to think that us manual guys are in the same position that the pit traders were and are in now.
It is going to get harder and harder for manual screen based traders as the markets get faster due to automated trading. I am sure there will be a future for automation assisted manual traders where fast, difficult execution is performed by machine with higher level input from a trader.
"It bothers the hell out of me thinking that a machine can do the exact same thing that I can do everyday even possibly better." The "trading floors" will adapt. Automated / Screen is the now and the future. They had it easy all these years, the smarter ones will adapt and survive. More and more traders on the floor are and will continue to be replaced by lower pay grad students monitoring what the quants put together. All them years enjoying and spending that easy money, I hope some were smart enough to have saved most of that "honestly" earned money or at least have plan B or C in their back pocket. Man how easy it is to get comfortable when your on top, until they turn you bottom side up. I can't tell you how many calls I've received from "prop guys", broker friends on the NYSE, asking me how do you do it man. Yeah 5+ years of sacrifice and now they want me to just give it away to them. While they were partying and spending I was working on Plan B and C. I wish then luck though.
Im no expert but I think the programs will kill each other. I also think there will always be room for the small trader because it is much easier for him to maneuver.
At least we finally started ridding of the corruption on wall street and the automation will only improve the whole system. Now instead of getting raped by joe smoe on the floor you are getting tricked by highly intelligent adapting algorithms. The patterns are still the same , always will be, whether human or computer. Except the computer is quicker, smarter, and doesn't tire.
I must be naive. How can you consistently make money by taking 1-2 ticks on ES? You'd be eaten alive by commish. As far as risking only 1 tick, the noise floor is greater than that. I'm sorry to sound critical, but it just doesn't seem to be workable. I've been consistently profitable on a simulator doing what you described, but it's because of unrealistic fills. As far as automation is concerned, I agree with Bearbelly. I could see a "bot war" where bots kill each other off and leave human traders standing...
Computers are programmed by humans, and their main advantage is that they never get tired or hesitate. Arbitrage, and the bid/ask games are and will be dominated by computers, but there always will be a room for manual traders, if you go for more then 1 or 2 ticks. I have until recently traded DAX, and sometimes was able spot algorithms fighting each other, it is usually over within seconds.
I make money by reading the order flow and picking up the spread with a large number of contracts. I have been around the markets my whole life and have developed a good feel for the markets. I am not your average chart reader or technical man. I trade almost strickly off of order flow. With this program trading though (especially with the bonds which I scalp also) the bids and offers are so big that it can sometimes cloud where the real order flow is coming from. I would like to know if this bid offer size will only get bigger and become worse or eventually all of the huge fake orders will go away. Also I do agree with those that think that the computers will eventually kill each other and that will be the end of that. I think this will come from the fact that at some point everyone will have the best of the best technology and everyone elses program will be to smart to take the other trade of the opposing computer. That will eventually kill all liquidity and the exchanges should step in at that point. I would also like to hear what others think about program regulation by the exchanges. Thanks Again
COME ON!!!!!! I know you guys have more to say about automated trading than this. These things might take our jobs in the future I want to hear some opinions.