Saturday, August 18, 2012

Working for "The Man"

Click to enlarge.

"The Man" would clearly prefer a legion of fully automated robots. That doesn't mean that there aren't exciting new career opportunities opening up to fill the gap though.

Day trader

A retail day trader is a speculator who works for himself, or in partnership with a few other traders. A retail trader generally trades with his own capital, though he may also trade with other people's money.

Just How Much Do Individual Investors Lose by Trading? (pdf)

Less comprehensive studies suggest that trading losses and costs for individual investors in the United States are about 2 percentage points a year (Barber and Odean, 2000, 2001). (U.S. individual investors trade less actively, but run a higher risk of trading with better-informed institutional investors.) Countries around the world are increasingly counting on personal investment accounts to fund their citizens’ retirements. Yet most individuals have no training in investments; many hold underdiversified portfolios and routinely make poor trading decisions. Over a savings horizon of 20 or more years, an annual return shortfall of 2 to 3.8 percentage points will result in a tremendous reduction in potential wealth.

Common Sense Theories

1. Advanced day trading tools provided by online brokers will never make the average day trader better than the average day trader.
2. Advanced day trading tools provided to retail investors will never match the trading tools of institutional investors.

Source Data:
St Louis Fed: Custom Chart


Mr Slippery said...

Day trading was easy in 1998 when everything went to a 40 PE. Today, trading is hard even for the institutional investors. CalPERS had a 1% return on assets last year, with a goal of 7.5%.

In 1998, human traders were not up against HFT robots that trade in the 20 millisecond range, literally faster than an eye blink. That, of course, can work against you if your robot has bad wiring.

Stagflationary Mark said...

Mr Slippery,

Here are two things that I have no desire to do!

1. Continually day trade against professional institutional traders.

2. Spend the day filling in as a professional football defensive lineman.