I have not posted a comment for several days now. I have been finalizing a large project (not related to trading) and at the same time watching the market(s). The other project will be completed in a few days and I will mention it at that time.

The watching of the market has been interesting. I have had time to watch and think about things. I have been trading for more than forty years. Things have changed a lot. Some of those changes I rate as very good, some as open to question and some not so good.

All of the following are my thoughts and not necessarily all inclusive or unbiased.

First let’s mention the good:

Direct order entry – we can act almost instantly these days.

Far lower commissions – we trade for a fraction of what it formerly cost per trade.

Computer generated charts – once I had to get them weekly.

Real time data delivered at a reasonable price – a dream when I started.

Up to date news for the little guy – not as good as the pros get, but pretty good.

Secondly, the not so good:

Market manipulation – it has become a serious problem. I have long known that gold and silver were manipulated – with the authorities looking the other way. Now manipulation seems to be rampant in all markets and the authorities are either complacent, or in some cases, seemingly overtly encouraging the manipulators.

Government – particularly the Fed, is having an effect on the markets that ranges from overt manipulation to naïve micromanagement – both based on models that are questionable at best.

Lastly, the open to question:

High frequency trading – at heart, I believe in the free market system and generally do not like anything that conflicts with the action of a free market. However, in the case of high frequency trading, I am still on the fence. The little guy, and I am one, cannot compete with the speed of trade execution of a computer. For some time now, I have not placed much value in the bid and ask size data because I noticed that it could not be relied upon, as it once was, to indicate the strength of a market move at the moment. Once upon a time, when the bid size started going down, it meant that a market move up was weakening and a down tick could be forthcoming. Lately, I have seen the reverse happen all too often – the bid size decreases, and suddenly price moves up. That is not proof of high frequency trading manipulation of the market, but it begs for a logical explanation.

Finally, I am a short term technical trader, but fundamentals are important to me, because I realize that in the long term fundamentals actually move markets. I find it illogical these days the way the market reacts to fundamental data events. There was a time when good reports caused the market to rally, bad reports to cause the market to retreat and mixed reports would generally have little effect. It would take far too much verbiage to fully explain that, but, in my humble opinion, it ain’t so anymore!

I truly fear that the markets are getting to the point that we little guys are so few and insignificant that we will, like old soldiers, simply fade away. I really hope that I am wrong, because I truly love the challenge of trading – even today when there are so many obstacles to doing it successfully.

Good luck in your trading – and be careful, the markets are not your friend.

 

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