70% Of All Stock Market Trades Are Held For An Average Of 11 Seconds

[bogbrush]

Computer induced flash crashes make a laughing stock of sober "stops."

Don't use automated stops, use judgement.

For a proper investor rather than a speculator I don't see the problem. For a speculator, if you lose because somebody else has a better speculation system then tough.

[@contradevian]

Eleven seconds? Crikey, they're slow - maybe they're struggling with the Milanese borsa too.

I for one think there ought to be one government-mandated bid and ask for everything.

(the bashers amongst you really ought to figure out if you're beating up on add or take strategies, my eyes are boggling trying to un-knot the drivel in this thread)

If we are talking drivel you should at least explain why its drivel.

[Tiger Woods?]

Don't use automated stops, use judgement.

For a proper investor rather than a speculator I don't see the problem. For a speculator, if you lose because somebody else has a better speculation system then tough.

Some people go to work and cannot spend their entire day monitoring their positions. Sure, if you have tight stops you take a reasonable risk, but when your stops are 30% off the market and the market drops a huge amount for seconds or minutes before returning to where it was...well, that is hardly an orderly market conducive to sober investment is it?

[ParticleMan]

For a proper investor rather than a speculator I don't see the problem.

The question the HFT bashers need to ask themselves is - are they wanting to buy yield, or wanting to trade volatility?

Because they're two sides of the same coin.

"Investment" is a platitude you use when selling placebos to the starry-eyed (and very rarely elsewise), in my experience.

[Georgia O'Keeffe]

Don't use automated stops, use judgement.

For a proper investor rather than a speculator I don't see the problem. For a speculator, if you lose because somebody else has a better speculation system then tough.

indeed we seem to have morphed speculators into investors on here, personally i think anything under a year is speculative. The easy way to avoid these intraday hiccups is avoid using stops and if you want further security buy options

[ParticleMan]

If we are talking drivel you should at least explain why its drivel.

Add strategies widen the spread, reduce yield, increase time horizon, and reduce volatility.

Take strategies narrow the spread, increase yield, reduce the time horizon and increase volatility.

I'm sticking with my one government-mandated bid and ask for everything.

[Confounded]

^^^This is the problem. I don't mind getting stopped out in a falling/rising market. I do mind when a computer algorithm drops the share price 40% and then within 30 seconds everything is back to normal for the rest of the month. I've been a victim of it myself and was rightly pissed off.

It can also happen when market makers collude, which I am almost certain they do with respect to some of the shares with lower liquidity. I'm very sceptical about some of the trading that goes on with some of the smaller companies.

Yep when combined with the other countless layers of manipulation the market is too far gone.

Central bankers PLEASE LET THE MARKETS CLEANSE THEMSELVES!

[Constable]

Don't use automated stops, use judgement.

For a proper investor rather than a speculator I don't see the problem. For a speculator, if you lose because somebody else has a better speculation system then tough.

I agree. Although I don't make a distinction between "speculators" and "proper investors" - it's all speculation really, it's just the trading strategies that are different. People shouldn't be in the market if they can't accept the risk.

[ParticleMan]

Yep when combined with the other countless layers of manipulation

You do realise that HFT bashing is the regurgitation of propaganda coming from the add side don't you?

(the other side is routinely beating them in key markets)

Just so long as you're happy with your role in that...

Edited October 24, 2010 by ParticleMan

[Confounded]

indeed we seem to have morphed speculators into investors on here, personally i think anything under a year is speculative. The easy way to avoid these intraday hiccups is avoid using stops and if you want further security buy options

What you are forgetting is the vast majority of retail investors do not have an in depth understanding of how the markets work and have been schooled that sensible investors should use stop losses as a matter of discipline.

You also have a large pool of investors that put real liquidity into the markets trading charts and momentum using the many trading platforms available. These are out and out speculators but their systems rely on the discipline of stop losses and technical indicators. Take these people out of the market and you are not left with a lot.

For you to have the beliefs you do in the long term direction of the markets you need to also believe in the socioeconomic consequences of a broken market.

[ParticleMan]

People shouldn't be in the market if they can't accept the risk.

See that's where the government-mandated bid and ask really come into their own.

Maybe we could even give people some sort of certificate showing their interest in this ... de-risked... stake.

Numbered, naturally (otherwise how would we ever keep track?)

And on nice fancy paper too - put some gilt leaf around the edge.

We could even put some tear-off tabs along it - every time a dividend was paid, one more could be torn off...

[ParticleMan]

The funniest thing about all this is that nobody's caught on that a short duration on a stock is a long duration on a flow.

And vice versa.

P T Barnum was right.

[Constable]

See that's where the government-mandated bid and ask really come into their own.

Maybe we could even give people some sort of certificate showing their interest in this ... de-risked... stake.

Numbered, naturally (otherwise how would we ever keep track?)

And on nice fancy paper too - put some gilt leaf around the edge.

We could even put some tear-off tabs along it - every time a dividend was paid, one more could be torn off...

can you explain what you mean by this please?! you've lost me.

[Georgia O'Keeffe]

What you are forgetting is the vast majority of retail investors do not have an in depth understanding of how the markets work and have been schooled that sensible investors should use stop losses as a matter of discipline.

You also have a large pool of investors that put real liquidity into the markets trading charts and momentum using the many trading platforms available. These are out and out speculators but their systems rely on the discipline of stop losses and technical indicators. Take these people out of the market and you are not left with a lot.

For you to have the beliefs you do in the long term direction of the markets you need to also believe in the socioeconomic consequences of a broken market.

im pretty sure the market will remain whether retail investors are present or not, the record number of them is the consequence of this credit boom from the 80s, its a confirmation of the extreme bullishness still prevelant in the equities markets, i have no problem with them dissappearing for a few years which is the likely and normal happening at market bottoms, that might make it more expensive to speculate but it doesnt really matter because i'll be able to actually invest and minimise speculation

Edited October 24, 2010 by Tamara De Lempicka

[ParticleMan]

can you explain what you mean by this please?! you've lost me.

Well, if you run the term "ultrashort stock durations are bad m'kay" through to it's self-recursive end you wind up trying to regulate how often and at what price your neighbours can trade.

Which smacks so much of control-freakery you better have some sort of (probably self-awarded)... legislative... mandate to do so, and, some sort of ... police... force to back you up.

ie, it's a direct request for state intervention; if you want your neighbour to cease and desist his (rather more efficient) tomato stall down the market because he's getting inside your price bands quickly enough to remove the liquidity you're adding then there's not too many ways to do it, and pretty much all of them require passing a few laws about what is and isn't acceptable (and none of these increase efficiency, although most of them will restore your margin if not your happier-with-status-quo customers')

To make it really fair and a truly level playing field, you and your fellow stall holders will need to agree on precisely what the acceptable price band for a tomato is - what price you will offer, and what price you will ask.

And this will need enshrining in said law.

Ridiculous, isn't it.

But here's the truly amusing thing - there's already a market just like this - the primary gilt market (the government will buy one back from you at its face value).

[Injin]

Well, if you run the term "ultrashort stock durations are bad m'kay" through to it's self-recursive end you wind up trying to regulate how often and at what price your neighbours can trade.

Which smacks so much of control-freakery you better have some sort of (probably self-awarded)... legislative... mandate to do so, and, some sort of ... police... force to back you up.

ie, it's a direct request for state intervention; if you want your neighbour to cease and desist his (rather more efficient) tomato stall down the market because he's getting inside your price bands quickly enough to remove the liquidity you're adding then there's not too many ways to do it, and pretty much all of them require passing a few laws about what is and isn't acceptable (and none of these increase efficiency, although most of them will restore your margin if not your happier-with-status-quo customers')

To make it really fair and a truly level playing field, you and your fellow stall holders will need to agree on precisely what the acceptable price band for a tomato is - what price you will offer, and what price you will ask.

And this will need enshrining in said law.

Ridiculous, isn't it.

But here's the truly amusing thing - there's already a market just like this - the primary gilt market (the government will buy one back from you at its face value).

One problem there might be is that of responsibility.

if we were to imagine a more sane system - one where stuff you pay to happen is your fault and you get proceeded against when bad things occur due to your actions - micro trades might be very, very unwanted.

But that's a solution to an incentivised problem, we don't like those in the west.

Yet.

[Constable]

Anyone who trades should read Mark Douglas...

"If we look at the markets' behavior as a function of price movement, and if price movement is a function of traders who are willing to bid prices up or offer them lower, then we can say that all price movement (market behavior) is a function of what traders believe about the future. To be more specific, all price movement is a function of what individual traders believe about what is high and what is low.

The reasons that support any given trader's belief that something is high or low are usually irrelevant, because most people who trade, act in an undisciplined, unorganized, haphazard and random manner. So their reasons wouldn't necessarily help anyone gain a better understanding of what is going on."

Trading In The Zone is a naff title but is a great read...

From Chapter 7 – The Trader’s Edge: Thinking In Probabilities

"Because they [the casino and the professional gambler] don’t have to know what’s going to happen next, they don’t place any special significance, emotional or otherwise, on each individual hand, spin of the wheel, or roll of the dice. In other words, they’re not encumbered by unrealistic expectations about what is going to happen, nor are their egos involved in a way that makes them have to be right. As a result, it’s easier to stay focussed on keeping the odds in their favour and executing flawlessly, which in turn makes them less susceptible to making costly mistakes. They stay relaxed because they are committed and willing to let the probabilities (their edges) play themselves out, all the while knowing that if their edges are good enough and the sample sizes are big enough, they will come out net winners.

The bottom line is that there is some degree of sophistication to thinking in probabilities, which can take some people a considerable amount of effort to integrate into their mental systems as a functional thinking strategy. Most traders don’t fully understand this; as a result, they mistakenly assume they are thinking in probabilities, because they have some degree of understanding of the concepts.

Traders who have learned to think in probabilities are confident of their overall success, because they commit themselves to taking every trade that conforms to their definition of an edge. …They have learned, usually quite painfully, that they don’t know in advance which edges are going to work and which ones aren’t. They have stopped trying to predict outcomes. The have found that by taking every edge, they correspondingly increase their sample size of trades, which in turn gives whatever edge they use ample opportunity to play itself out in their favour, just like casinos.

In light of the fact that anything can happen, wouldn’t it make perfect sense to decide before executing a trade what the market would have to look, sound, or feel like to tell you your edge isn’t working? So why doesn’t the typical trader decide to do it or do it every single time?

Any of the best traders (the probability thinkers) could have just as much negative energy surrounding what it means to be wrong as the typical trader. But as long as they legitimately define trading as a probability game, their emotional responses to the outcome of any particular trade are equivalent to how the typical trader would feel about flipping a coin, calling for heads, and seeing the coin come up tails.

As traders, we can’t afford to let our pain-avoidance mechanisms cut us off from what the market is communicating to us about what is available in the way of the next opportunity to get in, get out, add to, or, subtract from a position, just because it’s doing something that we don’t want or expect.

We have to be rigid in our rules and flexible in our expectations.

A probabilistic mind-set pertaining to trading consists of five fundamental truths.

1. Anything can happen.

2. You don’t need to know what is going to happen next in order to make money.

3. There is a random distribution between wins and losses for any given set of variables that define an edge.

4. An edge is nothing more than an indication of a higher probability of one thing happening over another.

5. Every moment in the market is unique.

The idea is to create a carefree state of mind that completely accepts the fact that there are always unknown forces operating in the market. When you make these truths a fully functional part of your belief system, the rational part of your mind will defend these truths in the same way it defends any other belief you hold about the nature of trading systems.

When I put on a trade, all I expect is that something will happen. Regardless of how good I think my edge is, I expect nothing more than for the market to move or to express itself in some way. However, there are some things that I do know for sure. I know that based on the markets past behaviour, the odds of it moving in the direction of my trade are good or acceptable, at least in relationship to how much I am willing to spend to find out if it does.

I also know before getting into a trade how much I am willing to let the market move against my position. There is always a point at which the odds of success are greatly diminished in relation to the profit potential. At that point, it's not worth spending any more money to find out if the trade is going to work. If the market reaches that point, I know without any doubt, hesitation, or internal conflict that I will exit the trade. The loss doesn't create any emotional damage, because I don't interpret the experience negatively. To me, losses are simply the cost of doing business or the amount of money I need to spend to make myself available for the winning trades. If, on the other hand, the trade turns out to be a winner, in most cases I know for sure at what point I am going to take my profits. (If I don't know for sure, I certainly have a very good idea.)

The best traders are in the "now moment" because there's no stress. There's no stress because there's nothing at risk other than the amount of money they are willing to spend on a trade. They are not trying to be right or trying to avoid being wrong; neither are they trying to prove anything. If and when the market tells them that their edges aren't working or that it's time to take profits, their minds do nothing to block this information. They completely accept what the market is offering them, and they wait for the next edge".

[ParticleMan]

if we were to imagine a more sane system - one where stuff you pay to happen is your fault and you get proceeded against when bad things occur due to your actions - micro trades might be very, very unwanted.

Sure, the notion that you can flatten the underlying and continue to recieve the flow is complete drivel.

But if you pull the rug out from under that one, I'll tell you right now you're going to have a lot of very red-faced and huffy 65^H6^H7^H8 year olds to shout down outside the gates of Westminster.

[Injin]

Sure, the notion that you can flatten the underlying and continue to recieve the flow is complete drivel.

But if you pull the rug out from under that one, I'll tell you right now you're going to have a lot of very red-faced and huffy 65^H6^H7^H8 year olds to shout down outside the gates of Westminster.

Oh, it won't happen until they won't shout.

We won't see it.

100% guaranteed.

[50sQuiff]

Well, if you run the term "ultrashort stock durations are bad m'kay" through to it's self-recursive end you wind up trying to regulate how often and at what price your neighbours can trade.

Which smacks so much of control-freakery you better have some sort of (probably self-awarded)... legislative... mandate to do so, and, some sort of ... police... force to back you up.

ie, it's a direct request for state intervention; if you want your neighbour to cease and desist his (rather more efficient) tomato stall down the market because he's getting inside your price bands quickly enough to remove the liquidity you're adding then there's not too many ways to do it, and pretty much all of them require passing a few laws about what is and isn't acceptable (and none of these increase efficiency, although most of them will restore your margin if not your happier-with-status-quo customers')

To make it really fair and a truly level playing field, you and your fellow stall holders will need to agree on precisely what the acceptable price band for a tomato is - what price you will offer, and what price you will ask.

And this will need enshrining in said law.

Ridiculous, isn't it.

But here's the truly amusing thing - there's already a market just like this - the primary gilt market (the government will buy one back from you at its face value).

I agree with your principle, but I'm finding it hard to accept that we must protect the rights of giant corporations to use supercomputers to nickel and dime Joe Blogs out of his pension.

[ParticleMan]

I agree with your principle, but I'm finding it hard to accept that we must protect the rights of giant corporations to use supercomputers to nickel and dime Joe Blogs out of his pension.

That's part of my point.

It's the giant corporations who run these pensions that are looking to have the laws passed.

(and pushing this drivel into the press to generate the necessary angry rabble required to do so)

Makes your head spin doesn't it.

[ParticleMan]

So here's a quick straw poll for the anti-anti brigade.

1/ If you were offered a higher-than-market price for a stock you held from someone offering you a guarantee to sell it back at market price would you take it?

2/ If you were offered a lower-than-market-price for a stock you were yet to buy from someone offering you a guarantee to buy it back at market price would you take it?

3/ If you were offered an at-market-price for a stock you held from someone offering you a guarantee to sell it back to at lower than market price would you take it?

4/ If you were offered an at-market-price for a stock you were yet to buy from someone offering you a guarantee to buy it back at higher than market price would you take it?

... and lastly...

5/ Assuming every participant in some market gets all signals for each of the above - market-buy, market-sell, guarantee-buy, guarantee-sell, and of course the guarantee itself at exactly the same time - what would be an acceptable mandate in terms of duration before accepting your own response to the offer

6/ Assuming every participant in some market gets all signals for each of the above - market-buy, market-sell, guarantee-buy, guarantee-sell, and of course the guarantee itself at exactly the same time - what would be an acceptable mandate in terms of duration before accepting everyone else's response to the offer

Edited October 24, 2010 by ParticleMan

[bogbrush]

Some people go to work and cannot spend their entire day monitoring their positions. Sure, if you have tight stops you take a reasonable risk, but when your stops are 30% off the market and the market drops a huge amount for seconds or minutes before returning to where it was...well, that is hardly an orderly market conducive to sober investment is it?

Don't use automated stops, or don't go to work, or don't invest. The choice is yours, but if what you really want is to set it all up using technology and then stop someone else using better technology then I'm afraid you just got outcompeted.

[Bloo Loo]

"70% Of All Stock Market Trades Are Held For An Average Of 11 Seconds "

well this is the logical outcome of free markets combined with technology created by free markets.

this pattern of trading in the markets is not abnormal, its the new normal.

its perfectly reasonable to suggest that as information assymetry is reduced by comms tech that the average holding period for informationally sensisitive securities would necessarily reduce.

all the worshippers of the invisible hand need to suck this up because its exactly the dish that they ordered.

now, would you like dessert or the bill?

free market?...just wondering how I can plug MY PC into the stock market system directly?

Its back to where you had to telephone your broker for 2% cut every time you need to make a buy.

ths sounds awfully like front running,,,,or insider trading to me.

a market or robots is not a market...a robot has no needs, cant get news, doesnt understand what it is doing...welcome to SKYNET.

[Parkwell]

I agree with your principle, but I'm finding it hard to accept that we must protect the rights of giant corporations to use supercomputers to nickel and dime Joe Blogs out of his pension.

Surely the price of supercomputers is coming down every day.