I only have personal experience from 1957 onward. In stock trading, the volatility has been about the same. In terms of making money (my standard) the opportunity has shifted in the direction of making the same money in less lengthy intervals. This affects the most important variable in making money: the exponent of the annual compounding formula. I crossover trade high beta repeater type stocks. I use leading indicators of price. In commodities trading, over the years a lot of new instruments have appeared. There is no quality regulation so a person is very unrestricted in what and how he does things. The major improvement has been to lessen the granularity of all the markets. This means you can move the operating point to increase the exponent much more than you compromise on the size of each profit segment. The greatest advance in commodities is being able to see more and more of the "controllers" strategies. As you would expect I fit into the parasitic, front running technician category. In the last 20 years, I would say that the "take" has about doubled. One nice aspect is the size of the markets. Most markets continue to grow and mature. And there are more and more markets. The advent of "quants" has been a really nice addendum; the churning effects makes the use of logic a lot "smoother". I use a count down counter; there is no chatter to have to eliminate at this point. In logic, the finite possible solutions are all known. As money is made, logic steers you to the end effect solution that becomes active, then you zoom in to be focused on carving the turns at a multiple of the market's contemporary capacity (this is a harmonics determination). The future looks unlimited and much better year by year. Trading costs are trivial. There is no competition. Fortunately, there is a misplaced belief system vis a vis "edges". The non-edge orientation faces head on both efficiency and effectiveness. The test of performance comes down to two things: trend volatility and trend overlap. The combination is called: the long diagonal. A cycle of two opposite trends has two long diagonals, one for each half. The market offers; the taking relates to extracting the full offer.
The reason you had all those TA books written years ago was because that was the first era when accurate daily and intraday information became available. Obviously, that sort of environment eventually matures and the pace of development slows. Now that you have computers doing a lot of the heavy lifting of analysis, you see a movement away from a reliance on visual representations of price to more abstract representations of price in data files and time series. I do think implicit in globalization is that some countries which began the globalizing era among the leaders will sink as the rest of the world catches up. In some respects, this is what is happening in the European periphery right now. Spain basically has nothing to really offer the world (sorry, Spaniards reading this, but it's pretty much true), nor does Greece. At best, they are tourist locations or living museums. Even within the US, which overall has survived globalization pretty well, you see entire towns and regions devastated by the advent of emerging markets where the same work can be done for less. But, just like the process involving TA, eventually that process will grind down to a very slow pace, with an approximate sort of equilibrium globally. Find the median standard of living country and that (plus whatever incremental improvements everyone's standard of living will have from the continued development of the various sciences and technology) will be the basic standard of living in the future. For some, it will be a big step up and for others a big step down. The places which will be partially exempt from this will be places like Lichtenstein and Zimbabwe. One because their small population is so skilled that they won't be as subject to competitive pressure and the other because they're just so screwed that even making it to the bottom of the economic ladder is impossible, at least for the foreseeable future.
My opinion is that markets have gotten more efficient as computing power has been applied to the markets. One of the reasons for the hyperbolic growth in trading is the access of computing technology. So everyone was running to exploit inefficiencies that were previously unexploitable and all those are gone. So you have to be smarter (which is really hard and largely unsustainable). This isn't different than computers being applied to manufacturing firms making them more efficient in their operations. You see this in derivative products where edge was huge and bank desks and floor traders would make a lot of money despite being unsophisticated. Now you have amateurs talking about third order greeks on this board because delta and gamma aren't interesting enough. This is only possible because we can calculate delta and gamma on our cell phones.
These are good observations. The code is out there; if accusations are correct, then the code is even making its way out of the top shops into startups (through theft by exiting employees). But even without code theft, we still have a world where 1) computers are getting faster; and 2) code traders are continually improving their code. It's somewhat analogous to the progress that's been made in algorithmic image recognition over the past 10 years -- you're not going to see it get worse. The difference with trading is that this is a competition towards efficiency, so that much of the profit that was once there in short-term trading is simply gone, and it will never return. It's capitalism, for better and worse, although generally better I'd say, since those profits are now kept by longer term investors and/or the companies that need to raise capital. The HFT world is shrinking -- even the mighty GETCO is having layoffs. I think the only people who are really hanging on to their profits (as a group, that is) are brokers who internalize "muppet" order flow from retail clients. This in turn costs us all, but of course efforts by the SEC to halt this are heavily resisted.
Market efficiency depends on edge and volatility. In sub minute time frames, liquidity for well known setups rarely exist. Price will jump or gap to the new level, and this, I suspect, results from algo exploitation. Especially when it comes down to order flow analysis, sub pennying, traditional front running humans used to do on the floor, but now, the computers do it in a couple milli seconds. But 3-5-10 mins candles? The patterns are the same. The liquidity in the micro-structure on those longer timeframes is so large, they can't be arbed or sucked up by algo shops. So the patterns remain. Also, under highly volatile conditions, patterns work great. A lot of this comes down to volatility = range contraction & expansion. When the market is tight, like it has been the past few years, traders wonder if the computers have sucked out all the edges? I often read seasoned traders lament 'all the easy money is gone'. Hard to know exactly what they mean, because I don't know how they trade. For traditional breakout setups, yes, I think that's true. Then again, I began trading for real in 2007-08. So my experience is somewhat limited.
If as time goes on the markets become more efficient, what does that mean for the trader? They lose. Efficiency meaning that finding a profitable edge becomes more difficult. Does that mean that as more and more smart brains enter the arena it becomes harder to make a profit? Yes. Will there come a point in time that it will be very difficult to make a profit as faster and smarter scalpers continue to pick off the winning edges. Does that mean price behaviour will become more random? Possible. More probable is increase in volatility. Do traders themselves become more efficient, smarter, less naive, more cynical, less trusting, more competitive where we enter a world of dog eat dog until we all die? Uhhh.. have u been hiding under a rock? I'm a bit concerned about this, Where will it end? Death.
Jack, your brilliant subliminal message buried in your customary schizophrenic word salad was: MARKETS USE TWO LOGIC MAKING MONEY. I could be wrong, but think that means long and short.
The fucking markets go up irrationally and the fucking markets go down irrationally. Like they always have. Like they always will. Where is the increased efficiency in that?
Trading always has been and always will be a ZERO SUM GAME. That is, it always has been and always will be a dog eat dog world. I guess with stocks, it is a slightly positive sum game since stocks represent companies with earnings, but the smaller the time horizon the more it becomes a zero sum game, with the longer the time horizon the more it becomes a slightly positive sum game. Also, there is litte to no difference between the markets now and the markets 100 years ago. You understand that the NASDAQ just had a bubble a decade ago right? If it was becoming so efficient, why was the biggest bubble in US market history just less than a decade ago?? Gold was trading at $275 per ounce with silver at $4.50 per ounce just a decade ago (i actually bought physical silver at $4.25 per ounce, only bought about 2000 ounces, but still). How can an asset class be SO depressed below its true value in such efficient markets? We just had the real estate bubble af ew years ago, how can...well, you get the point. The markets are the same now as they have always been, because they are based on human emotion. What you are saying would be true if the numbers were about math and logic, where more sophisticated algorithms could get closer and closer to the truth. But the market is based on human emotion.
logic man, you are completely off-base when comparing these two "different worlds" of TA/trading and standard of living. One is a zero sum game while the other is a positive sum game. You are assuming that the standard of living of more developed areas will come down? Why, because it has to even out with less developed areas? You are assuming that there are only a finite number of jobs/production and since area A can do it cheaper, jobs will flow there. Well, it doesn't work that way, because it is very much a POSITIVE SUM GAME! You can have both places raise their standard of living because just because one place does better it doesn't mean that "better" has to come at the expense of the other place. In fact, the very opposite is true, in that usually when one place raises its standard of living, even if every thing else is even in the other place, its standard of living will automatically rise. Let me give you an example. Take an invention like the plow, or other technologies which increase the productivity of agriculture. 200 years ago, something like 85% of the USA was in the business of agriculture, today it's more like 2%. What does this do? Does this cause those people who would have otherwise worked in agriculture to die since they have no jobs an no way to survive? OF course not. What happens is that per capita capital (what wage rates / earnings depend on) goes through the roof, a much smaller number of individuals are needed to produce food and thus this frees up the labor to produce other goods. The total amount of goods in the society increases massively. There is no fixed # of jobs, the number of jobs is only restricted by the number of people willing and able to work. That is, as long as government stays out of the picture and does not distort the market. The key to the standard of living increasing throughout the world is the degree of which the world is a free market capitalist society versus a command and control socialist society. Greece used to be the center of the developed world, of course this was thousands of years ago, but nevertheless, what has changed? Relatively speaking, greece was "westernized" all those years ago, in teh sense that power was more diffuse, it was more in the hands of the people than the government (again, relatively speaking, and only in the "citizen" class versus the slave class). It's not that the Greeks are today worthless people, it's that they live in a worthless society which has become more and more command and control, socialist to the core, just like Spain currently is. Free the economies of teh world up and you can see the results. We have just witnessed one of the biggest miracles of all time as China, old communist China, over the last 40 years has moved away from command and control, almost pure socialism/communism to what it is today, which is basically as capitalist as the USA. This has resulted in hundreds of millions of people working their way out of abject poverty (poverty much worse than almost any people in the USA have to see), and into what is becoming a middle class. This has not hurt the USA, this has helped the USA and everyone else in teh world. Wealth is based on production and capital. Free up the societies of the world, and like China, the standard of living will rise everywhere. Including Greece and Spain.