Would you rather make 10,000 trades per second, or three trades per week?
If you have 11 minutes to spare, Barry Ritholtz has a good post on his site that includes a video by trader Yan Ohayan on the impact of algorithmic trading.
Did you know that 73% of the current trades in the market were done by machine? Or that some of the trading programs out there can do a trade once every 400 microseconds? Or that the programs compete with each other by “co-locating” (attempting to put their servers as close to the exchanges as possible), and by quote stuffing 9sending out thousands of phony quotes that other programs have to process, slowing them down)?
The video is a chilling look at what trading has become. It explains a lot about how humans can’t really compete with that, which is why day-trading scalpers using 1990’s methods are doomed to failure in the present system.
At the other end of the spectrum is “Chicago Sean” McGlaughlin, a reformed daytrader, who now trades from his apartment and blogs and tweets about how to simplify one’s trading. He’s the guy who claims an average of three trades per week — sometimes one.
If you ask me, Sean really is the one who has an idea worth following if you are a newbie to trading or investing anything under $100K. As human beings and not machines, we need to manage out lives as well as our trades. Simplicity is one reason I have been concentrating on VIX options, as it is much easier to master one number than to follow thousands of tickers. I think I will be emphasizing this approach in the months to come.
What is your plan to simplify your trading?
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