…or not. Lot’s of questions coming my way about the discussions in the media surrounding machine trading. Most are asking if I think that machine trading is the monster that it’s being made out to be, and if it’s killing the markets for regular day traders like us.
My own feeling that as long as real people account for the majority of the volume being traded each day, even if only a very tiny majority, then nothing has changed for us.
News outlets and people who have space to fill in magazines, newspapers, and television shows, like to try and find a new bogeyman to blame for the financial woes in the world. The “computers are taking over the markets” argument often comes up when markets start falling dramatically. But computers aren’t driving the direction, the micro trades they make are simply following the price, they’re not making it. They might exaggerate price swings to some minor degree, but they aren’t the determining factor. (Incidentally, exaggerated price swings are great news for day traders like us, they make for bigger and easier profits!)
In the meantime, those of us who understand how to read price can continue to profit as we always have done – or even more so while prices are swinging even more than usual.
On a similar theme, shorting has been temporarily banned in some European countries I note. This is of course, a completely ridiculous measure that serves no purpose other than giving the impression that politicians are “doing something”. When you consider than on the other side of any short sale there has to be a buyer, it’s clear why shorting in itself is not responsible for falling markets!