Social Influences of Being A Trader

[fletch2]

Quote from dddooo:

It's a combination of several factors:

-Volume per individual. One institutional trader moves tens of millions of shares a day, one average day trader moves a few thousand.

It may be a fact but you haven't demonstrated any relevance.

-Relationship with customers - institutional traders deal directly with their clients, when a mutual fund wants to sell IBM the contact GS or MER trading desks or IBM specialist directly. Institutional traders provide a service to their clients, day-traders

Well first of all I'm not limiting the discussion to day traders, but simply individual traders not operating out of a pit or an institution. The individual trader is his own client. Perhaps this is part of what annoys the institutions.

How do you explain that hedgers, large investors and mutual funds hate day-traders when according to you they benefit from their existance.

I did? All I said was the speculation facilitates hedging and vice-versa.

They are not dummies you know.

Of course. They are smart enough to know that the more they retain control over access to the markets, the more they can profit from them. Seems to me they are first and foremost annoyed that their exclusive access to the markets is being threatened. The insider's club has a few "undesirables" milling around who weren't invited, and some of them are drinking the champagne.

Another question, if a trader buying from a hedger and assuming his risk is good, what about another trader who's front-running the hedger?

Clearly the overall net function of the market is what matters. There are a lots of participants with a lot of different objectives and methods.

Do you really think the markets would notice or detiriorate if all day-traders suddenly disappear?

I never suggested that they would.

On the other side there is no doubt that should institutional traders, pit traders, MMs or Specialists suddenly go on strike - the markets would seize to exist.

Sure. And?

I think what you're saying is roughly analogous to saying that independent voters should just stay home because no one individual's vote could possibly change the outcome of the election, whereas the parties get out votes on a large scale, organize most of the process, and there'd be severe dysfunction if the parties disbanded, and the parties are often annoyed at the way the independents are voting. The facts are true but the conclusion doesn't follow.

Fletch

 

[dddooo]

Quote from fletch2:

Do you really think the markets would notice or detiriorate if all day-traders suddenly disappear?

I never suggested that they would.

That's probably the key part of my argument, if day-traders' participation in the markets does not affect the markets (especially positively) in any way shape or form then our contribution to the society is non-existent or negligible as well.

If doctors, used car salesmen or institutional traders suddenly disappear the repercussions on others (their customers) will be quite severe, if individual traders disappear no one will notice.

That does not mean day-trading is wrong or bad, should be banned or restricted, that does not mean we should stop trading or should not be proud of ourselves. It only means that we should not expect respect and gratitude from the rest of the society as no other member of the society benefits from what we do for a living.

 

[fletch2]

Quote from dddooo:

That's probably the key part of my argument, if day-traders' participation in the markets does not affect the markets (especially positively) in any way shape or form then our contribution to the society is non-existent or negligible as well.

I see where you're coming from but I still don't quite agree with it because I think the independent/pit/institutional distinction has a degree of arbitrariness to it.

I think it's kind of like saying if all curly red heads with diabetes didn't vote, it wouldn't change the outcome of any election and therefore curly red heads with diabetes can't be considered as contributing to the functioning of a democracy. It's true in some sense but also seems to miss a larger point.

In any case, I agree with you that no matter how this all washes out in fact, traders are generally seen as glorified gamblers who are out for no one but themselves, and that's probably because there's at least grains of truth to it.

Fletch

 

[Neodude]

Quote from dddooo:

It only means that we should not expect respect and gratitude from the rest of the society as no other member of the society benefits from what we do for a living. [/B]

I think you have a very narrow minded view of market participants. Day traders and retail shops setup to service them have lowered commissions for all players in the field. They have lowered the barriers of entry and they do provide a substantial bit of liquidity for all the hedgers and mutual funds, therefore many members of society benefit from what day traders do for a living (i.e. 401k). The association between large volatility and day traders has not been proven, if the current market is any indication it probably is the opposite.

And lest we forget, without "consumers" the "producers" of our society have no where to sell their goods. Therefore consumers are contributors to society as well.

I agree, society will not lavish praise on day traders, but thats just because they don't know how markets work.

-Neo

 

[dddooo]

Quote from fletch2:

I think the independent/pit/institutional distinction has a degree of arbitrariness to it.

Oh yeah, absolutely, it's very arbitrary and it's impossible to draw a precise line dividing traders into "useful" and "useless" categories. My point was that the markets don't serve traders, they serve investors, hedgers etc. Traders do provide important services by facilitating transactions but 5% of traders provide 95% of services and 95% of traders provide remaining 5% of benefits (that's btw why I brought up volume before).

Quote from fletch2:
I think it's kind of like saying if all curly red heads with diabetes didn't vote, it wouldn't change the outcome of any election and therefore curly red heads with diabetes can't be considered as contributing to the functioning of a democracy. It's true in some sense but also seems to miss a larger point.

I'd rather compare it to our tax system. Everyone participates and pays taxes and everyone receives some of it back as government services. Some receive much more than they contribute, others receive significanly less. While it's next to impossible to figure out on an individual basis who contributes more and who contributes less than they consume, deep inside we all realize that the poor, unemployed and low-income people are net-negative and the rich are net positive. Similarly there are a lot of market participants but day-traders contribution to market health, efficiency and liquidity is IMO negligible at best compared to services provided by MMs, Specialists, Institutional and pit traders.

 

[cakulev]

Quote from dddooo:

The bottom line is the social value of traders (or gamblers) is zero, traders are not producing goods or services, at best they are redistributing wealth (in 90% cases their own ). BTW I am not saying there is anything wrong with being a trader, I simply provided the social perception of trading and tried to explain why I believe it was accurate. I personally could not care less what society thinks of traders but I prefer not to fool myself and face the reality, you may of course choose to believe all you want that society needs and values goods and services we as traders provide.

But they are providing two benefits:
-all traders provide liquidity
-successful traders make the market efficient. The unsuccessful traders on the other hand, provides unnecessary volatility.

 

[Pabst]

You're completely correct.

Speculation by it's very nature is parasitic. After all what is the essence of trading? It's merely buying limited supply at advantageous prices before later buyers are forced to bid higher. Regardless of one's timeframe we're all "racing the tape" so to speak. There's risk, there's reward, but there's very little nobility in the art of speculation.

That's not to say that selling insurance or men suits is necessarily noble either. In a service economy many folks are skimming.

When I was a young floor trader I would socially justify my gains as the product of "market making." And floor traders did provide a needed liquidity function. But I know in my heart the rationalization was largely self-serving bullshit. I was charging for liquidity and in aggregate my fellow pit traders were charging customers a lot for merely bidding and offering.

In youth you'll find you're peers are more impressed by what you make then how you make it. The financial accruements that accompany the campus drug dealer may be a source of envy to a bunch of 19 year olds but when you reach your 30's few are going to be impressed if your Benz is paid for by pot proceeds.

By the same token, I used to feel the ooh's and ah's from fellow party goers when I was a hot shot local in my 20's. Now, when I'm hobnobbing with educators, doctors, developers and other professionals I sense an attitude of not really jealousy or resentment as much as pity. As many intelligent people age, they become cognizant that life is not as much about material attainment as it is about worth. Me, I seek a bit of comfort and security without caring about contribution. However if any of you care about societies positive perception of you, then get on with less trivial pursuits than the growth of your trading account.

Quote from dddooo:

That's not a right comparison. If there was no cancer a lot less people would work in medical and drug industries but that does not mean cancer has social value. If there was no crime we could fire every single policeman but that does not mean that criminals have social values. Same with gamblers/casinos - casinos have social value as they provide gamblers with entertainment but gamblers and gambling are hardly good for society. In your specific example the brokerage industry would not even disappear as they are primarily geared towards investors rather than traders.


The bottom line is the social value of traders (or gamblers) is zero, traders are not producing goods or services, at best they are redistributing wealth (in 90% cases their own ). BTW I am not saying there is anything wrong with being a trader, I simply provided the social perception of trading and tried to explain why I believe it was accurate. I personally could not care less what society thinks of traders but I prefer not to fool myself and face the reality, you may of course choose to believe all you want that society needs and values goods and services we as traders provide.

 

[coolweb]

Pabst,

Funny how low some peoples self esteem that they need confirmation from others , isn't it?

I 'm just here for the money

social values?
HAHAHAHA

Yes, when I walk into the club VIP style with my beautiful girlfriend looking like money and backed up with money and everybodys dreaming they had what I have while standing in the back of the line.

Theres my social perception right there.

I'll think about my benefit to society when I'm 69 years old ready to die. More then enough time then.

 

[Cheese]

Quote from Pabst:
You're completely correct.

Speculation by it's very nature is parasitic. After all what is the essence of trading? It's merely buying limited supply at advantageous prices before later buyers are forced to bid higher. Regardless of one's timeframe we're all "racing the tape" so to speak. There's risk, there's reward, but there's very little nobility in the art of speculation.

That's not to say that selling insurance or men suits is necessarily noble either. In a service economy many folks are skimming.

When I was a young floor trader I would socially justify my gains as the product of "market making." And floor traders did provide a needed liquidity function. But I know in my heart the rationalization was largely self-serving bullshit. I was charging for liquidity and in aggregate my fellow pit traders were charging customers a lot for merely bidding and offering.

In youth you'll find you're peers are more impressed by what you make then how you make it. The financial accruements that accompany the campus drug dealer may be a source of envy to a bunch of 19 year olds but when you reach your 30's few are going to be impressed if your Benz is paid for by pot proceeds.

By the same token, I used to feel the ooh's and ah's from fellow party goers when I was a hot shot local in my 20's. Now, when I'm hobnobbing with educators, doctors, developers and other professionals I sense an attitude of not really jealousy or resentment as much as pity. As many intelligent people age, they become cognizant that life is not as much about material attainment as it is about worth. Me, I seek a bit of comfort and security without caring about contribution. However if any of you care about societies positive perception of you, then get on with less trivial pursuits than the growth of your trading account.

Wrong.

 

[Pabst]

Quote from Cheese:

Wrong.

Deep reply.