Yesterday … There is so much to say about yesterday …
The first thing I want to say is that I am ticked off. I am angry at the free-wheeling nature surrounding trading in the markets. Yes, anyone who trades understands that the small guy like me is up against 300-pound linemen on an uphill playing field. I have accepted this and traded quite successfully around it. Even yesterday, I did okay. Early in the day, my indicators told me something was coming (nothing like what happened), so I reduced my position in one trade to increase my position in another. As it turned out, this proved to be a good move, as both positions held up in the turbulence that bounced the market down and then not so down yesterday. But this is not the point …
The point is that I am angry at the lack of regulation in the electronic-traded markets. Yesterday proved how much power the 300-pound linemen really have, and how much force they can exert when coming at you on an unlevel playing field. We have to eliminate the ability of big-house traders to trade at such high frequencies.
Think about this …
- Trading houses can trade tens-of-thousands of trades in a millisecond.
- Computers decide when to trade those tens-of-thousands of trades in a millisecond.
- Computers with a prime directive to buy or sell relentlessly search out bids and asks, creating spreads that are not real. Some solid markets yesterday traded down to zero and then back up while others went from $30 to $100,000 (yes, $100,000) in less time than it takes to get up, walk around, and shake off the tension.
- NYSE is canceling 4000 trades from yesterday, and this is the only exchange that exerts any control over the high-frequency traders.
This is a system with a serious lack of control. One computer glitch and the whole system spins out of control, as we saw in the unprecedented drop yesterday. When this happens, it is like a virus spreading, fear and panic set in and the flow of destruction spreads.
When crap like this happens, it destroys confidence in the system. It sends the message to all of us small traders to get out of the way, yet, even though many of those 300-pound linemen also got pushed around yesterday, they cannot get out of the way because they if they do, they will be out of the game. So, the cycle continues – markets move quickly because thousands upon thousands of trades initiate and execute in a less than a millisecond.
Frankly and candidly, it really ticks me off.
Trade in the day; invest in your life …
