Algos Replacing Currency Traders
- Thread starter justrading
- Start date
Oddly, they didn't keep track nor mention the number of professional traders that became private traders or retail traders. There was a similar article about managers or executives at financial institutions...there has been a 25% drop that was also a part of the slashing of staff.
Most of the downsizing has been occurring at Banks because they have the most growth in algorithm trading...something not stated in the article.
The issue I don't understand is that if algorithm trading is replacing real people institutional trading...why is their a drop in overall currency trading ?
Therefore, it seems like the issue isn't just about algorithm models replacing real people traders and executives. It should have put more emphasis on the fact that there's a big decline in currency trading itself and because of that decline...they need to make cuts and the easy answer to that is to use computer models instead of people...savings on training, savings on insurance plans, savings on pension plans and so on.
It's not just currency trading...there's something similar occurring in Crude Oil/Brent Oil trading too as Oil continues lower and may stabilize as such for a few years.
Oil communities drying up, foreclosures, banks getting hit hard...easy solution to slow the losses is to cut jobs as in use computers models instead of people.
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Good points. I rely on the triennial BIS report for FX volumes, the next one should be 2016. I don't have a source for interim data, and I'm wary of cherry picked monthly comparisons without seeing a longer data series.
I've read here and there, as I'm sure you have, of banks closing trading desks as increased scrutiny and regulatory action takes its toll. A while back I posted a piece about the FX fix and stop hunting. Perhaps volume has declined because the thieves are not comfortable operating in the spotlight; pointer being the bit about one financial institution increasing regulatory compliance staff.
I don't believe for a moment that the LIBOR fix began and ended with that Brit chap being hung out to dry. Can't see how his immediate boss(es) would not have known, so perhaps this Chinese style 'kill the chicken to scare the monkey' is having an effect and banks are scaling back trading, including FX.
As a retail FX trader, I'm quite happy with the market as is. There is enough volatility to make money and that's what matters to me. I can't speak to the psychology of it, but I agree that successful FX traders who are laid off should do quite well trading their own accounts, so that would have been an interesting nugget if the writer had bothered.
If a computer can do a job as well as a human, then why waste the time of a human?
Yep, that's the point I'm making. Yet, if there's a negative impact on your profitability after doing such...you need to ask questions. The impact in this situation is the drop in currency trading...drop in profits.
That's the question I asked...if algorithms are suppose to more profitable, cost effective in comparison to humans...why is their a dramatic drop in currency trading unless its suppose to be like this when trading becomes more efficient ?
Anyways, there's another article involving how algorithms primarily compete with each other...financial institution against financial institution and that they currently in today's market environment are only profitable because of the special privileges the exchanges gives them.
Yet, its too early to tell and maybe the decline has more to do with global economies, dramatic drop in Oil and such.
Its funny because it reminds me of a friend that own a successful car wash business. Its fully automatic...machines does all the work except for the inside in which he employs a few workers for such. Yet, he told me that one of his services that's the biggest money maker is the high end custom service in which the autos are custom (personal cleaning) on the outside and inside with no automation...he only allows the women employees do that.
Kind'uv reminds me of the movie Ex Machina in which AI becomes self aware and very sexy. Maybe that's what's missing from algorithms in today's trading that's causing the decline in trading revenue...self awareness and sexy.
https://en.wikipedia.org/wiki/Ex_Machina_(film)
Then again, its too early to say considering we're about 10 - 20 years away from when "Quantum Computing" will become mainstream if Microsoft and Google gets their way. Heck, maybe were a few hundred years away from a type of "Terminator" like environment when computers become self aware and have the form of humans...they then decide he the human race is not needed...something to think about.
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