This will be the last time I write about HFT, hopefully. I had a conversation with a former pit trader and by former he traded from early 1980’s to 1993. We talked about how trading evolved. He explained that after the crash of 1987 the markets got more competitive.
Nothing weeds people out like change. When the teat runs dry some people get hungry. HFT changed the rules. So is/will FinReg and the economy. Market and rule changes are inevitable when people are losing their lives and livelihoods. We switch from risk tolerant to risk adverse. Risk aversion has its own risk. I am still trying to absorb what happened to the market in 2008, I do not have that perspective yet. I do not have time to get that perspective yet. I do not have the solution for the market. I have a solution for myself.
A day of trading, I have a strong belief, will be a microcosm of my career as a trader. There will be days or months where I am collecting and days or months when I am protecting. My day is made on a few trades, a month on 4 or 5 days and my career will be made on a few years. I know I can make a living trading. That is the safety net that allows me make more than a living.
The problem with most businesses and traders are they do not retract fast enough in bad times. If I am worrying about paying bills I will not grow. I have a six month rule; I do not adjust my living expenses until I can sustain my current trading results for at least six months. I pay for almost everything in cash, I live modestly. It is boring. But I am sacrificing the present for the future. A lack of self deprecation has caused me to become a spreadsheet trader (projecting my future earnings) in the past. I treated independent trading like a salary job, it is not that. The more I spend the less I make. Over a short period of time I can more easily control my spending.
The former trader I was talking to is a fiery guy. He got into a lot of fist fights in the pit, these escalated after the crash. When you fight in sports, in the pit, or in an editorial it takes your eye off of the original goal, winning. It is psychologically rewarding but not financially rewarding. If you fight long enough you can bring enough light to the situation to potentially change things. If you want to fight against HFT, by all means do it. But do not let the fight take away from the goal and save some money. If you have to think about your mortgage and what the market is doing, people like me win.
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