Also what about physical commodities everybody? Commodities are pretty much the only market where fundementals actually mean something. Do you guys think computer trading will be able to handle trading things like corn, crude oil or lean hogs like they handle the financial markets?
Computer trading is the present and will only get better. Human traders will become extinct except for a few super masters. How many chess grandmasters can beat the top computers in the world now? 1? None? Game over. Why would the exchanges step in when the computers dominate? That would be a really efficient market.
In times of old, the market maker either owned a seat or more likely, rented it. The market maker therefore had a considerably large "nut" (fixed cost) to overcome, before profits flowed into her pocket rather than her landlord's (seat-lord's). She had a need, an incentive, a reason, to be rapacious. But now, now that market makers are made of silicon instead of meat, the cost amortization schedule has lengthened and so the cost-per-month nut has fallen. In classic Paul Samuelson Microeconomics fashion, this savings has been directly passed on to the customer: you. Give thanks unto the Lord. Halleluja, praise be to Yahweh.
But what happens when everybody has the same technology and everybodies system is the best? The humans no longer will trade because they are at such a disadvantage. The systems become so smart that they won't take the other side of the trade because their too smart to do so. Sure it would be an efficient market but I doubt there would be to much volume. Then when volume dries up the exchanges start to lose money and then they will have to change something. Im not saying this will happen. I think that the efficient market thing is wrong wrong wrong. Everyone will have a different opinion. How will you know what a bushel of corn or a barrel of crude is worth purely by a computer calculation? You can't judge that you have to account for the markets emotion in the price of the commodity. Also how can a computer measure the fear and greed of a market and be able to quickly react and change to market conditions throughout the day? Only a human can do something like that. Im not saying that trading will be all manual in the future (although it wouldn't suprise me any) but I think that eventually manual traders will be able to learn what these machines are doing and study how they trade and be profitable that way. Automatic trading is just some trader fantasy of literally printing money in the markets. Sure some of the automated systems probably work well but the greater majority of them fail. If you want to be consistantly profitable in the markets do your homework and pay your dues by trading the market and learning the way it moves. Theres no substitute for good old hard work. IMO
Computers are all about efficiency, they are productivity tools designed to increase efficiency. The markets and trading in general is all about inefficiency. We are all constantly trying to make the markets efficient, that is why prices fluctuate constantly. Computers assist this process by identifying this and reacting to it quicker than humans. Thus boosting the efficiency of the trader using the computer, and when this is multiplied across an entire market, where various traders have various efficiency tools, it becomes increasingly difficult for the 'average' individual to get the 'low hanging fruit'. For the most part (although it continues to evolve), I would say most successful automation is designed to be 'reactive'. Automated trading is not discretionary. It reacts to the info it processes, and it is programmed to process info in specific ways(potential weakness #1). In addition, the markets are constantly reacting to exogenous events. This is why it is highly improbable there will ever be a situation where " everybody has the same technology and everybody's system is the best" (potential weakness #2). Someone will always be quicker , or have 'better' information. I don't think automated trading is, or will, kill the markets, it just changes it. As with all natural processes of evolution, some flourish, some perish, the majority slowly bleed to death, but everybody changes. The markets are dynamic, you can't stand still, if you are a 'smart', robust organism you adapt, if not well there's always...................... Auto
depends on how stocks "trend" in the future and how big the short term retrace. one reason why discretionary traders get knocked out of a trade is cos they don't have deep enough pockets to withstand the retrace (mental p&l stops) and each subsequent move up in the trend is too small and met with further retrace. basically, programs kill momentum which is important to "manual" discretionary traders and tho stock may eventually get to target, it may have shaken out the vast majority. programs are "noise". if you can identify noise, just put on ignore. that's one way of dealing with it.
SO say that what your saying is true. Does that mean that the average joe can't get in there and day trade a few contracts? Will the whole trading society have to be a quantitive genius or a great c++ programmer in order to be competitive in the markets or do you think that there will still always be a place for the manual day trader? No doubt that the trading world has changed. I heard stories of guys that were drop outs from high school that went on to make millions in the markets. One guy used to be a cook at hooters and started to day trade out of his parents basement and by the end of the week he was up 900%! Thats what is so great about these markets they don't care what kind of degree you have or how smart you are according to the latest test all that matters is the Profit or Loss at the end of the day. The markets are where the true American Dream and the Rags to Riches theme is. Is that time over now? Will you have to have a big college education and have a genius IQ in order to compete in this "automated world"? Maybe I am a little to paranoid about this whole thing but I have like I said been trading and around the markets my whole life. I am the first to admit I am not a quantitive genius and I don't know how to program or do crazy mathamatical equations. I just know how to trade markets by being around them so long. When I go off to college I do plan on getting a degree in computer science or something along with a finance or economics degree but is this really what is going to happen to this wonderful industry?
thats not true at all. actually, this is what computers excel at. you are not even in college and you think you know the industry.