The impact I've noticed in futures is not as much as seems to be the case in stocks, but it's enough that the "free money" from scalping is rapidly diminishing. Even if you can out-trade algos, competition from them reduces your execution edge. There is still the riskier money from trading intraday trends and reversals, but that is a lower quality (although more scalable) income stream. Bottom line - you no longer have a free income boost per annum from picking off stale orders or sitting 1 tick inside the bid & offer. Now your income is *solely* your directional plays. That makes daytrading riskier and less profitable than it used to be. Having said that, I'm having a decent year with my daytrading, just not as lucrative as before. There's a clear downward trend in the scalping opportunities out there. If you are an experienced trader with sufficient capital, it's probably now more profitable to focus 100% on speculating and investing. And you just improve each year at that, whereas as a daytrader you can't really get any better after say 3-4 years experience. Overnight stuff is easier to monitor, more interesting, and more scalable. Given that the typical new daytrader does not have the skills or experience to make directional plays profitably, it will be much harder to enter. It normally takes 6-12 months to get decent at directional intraday trading. In the past, you could earn money for those first 1-2 years via scalping, and then directional punts would move up to become 50-70% of your earnings as you gained experience. Now, new traders faced 1-2 years of bleeding instead of steady profits before they pick it up. Most won't have the $$$ or will to survive that long. Overall I would not recommend anyone go into daytrading now. Learn to invest or learn to position trade instead, those are immune to competition due to recurring flaws in human nature. Unfortunately for the lone wolf trader, it is virtually impossible to invest or speculate by yourself if you are small fry. Even the best can't do much with 10k, whereas in the past 10k was enough to make 1 mill+ in a few years as a good daytrader. So, you need to get into a trading firm nowadays as a noob IMO. That may be irritating, and more difficult to get into, but ultimately it's a faster learning curve to have mentors and colleagues than to go it solo. Let's face it, scalping was like floor-trading, a profession with a structural edge that paid way more than the skills required to do it were truly worth. It was a perfect candidate for automation. It's not really "true" trading, more like a profitable video game. Overall I don't think I'll be shedding any tears for its slow demise.
You hit the nail on the head with this post. Anyone seriously thinking of getting into trading needs to take your post to heart.