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Ive been spending the past 2 months going to various trading firms for interviews on a prop trading position. What I have learned is that pure discretionary traders are a rare breed. Most institutional trading is automated using statistical strategies, arbitrage, hedging, etc... (im still unfamiliar with all the different styles they have)
It seems as if technical trading frightens management because they have no clue what traders are actually doing. Hence, they prefer to train traders who come from a more mathematical background.
My question is this. Should discretionary traders be worried about the future of trading? Can discretionary retail traders compete with insitutions that pump millions designing automated systems, high tech platforms, top notch data feeds, etc... ?
It seems like traders can now profit through advanced systems without actually knowing how to trade. (without knowing technicals, trader psychology, etc..) Do we even need traders? In the near future, are we likely to see more systems and less traders? |
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Hmm, well I had written out a long winded post about the evolution of markets and my personal feelings about the future of professional speculation but I think I'd rather just sum it it because I'm sure most of you like me hate 3 page post responses.
In short I do not feel that the future of discretionary trading is in danger, the two things that never change, no matter who (or what) is behind the order is the footprint of how many shares/contracts were traded and at what price they were executed.
Do I think some markets like the S&P will become much more difficult to trade on an intra day basis with a small amount of capital? Yeah I do. But there will always be emerging markets, new products etc.
Also remember that markets evolve and change to shake the majority off it's back, it must to survive. Therefore programs and automated systems will have to be constantly readjusted. That is where the discretionary traders edge lies over the machine.
Programs are executing orders within the context of an explicit understanding, A human who is experienced in market structure etc. (a professional) is working from an implicit understanding. That is the key.
P.S Haven't any of you guys seen Terminator 3? lol