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learning the various intricacies of each individual system. The number of major exchanges and clearing FCMs will decline as per-trade profits continue to decrease and the cost of starting and supporting the technology infrastructure increases. The futures and options product will be wrapped into the product mix of the global-bankowned FCM capable of spreading these costs over a larger client base. Exchanges that have already seen the speed and cost savings of bringing new products to market electronically, but also have experienced the financial expense and expertise needed to upgrade and maintain vast computer networks, will continue to merge and partner with other exchanges. The number of smaller, specialized Internet or electronic exchanges designed to handle specific markets may grow because of low barriers to entry. This will also force major exchanges to adapt to meet the threat. |
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As always, the individuals and firms that learn from their own mistakes and the mistakes of others and react to these changes fastest and most efficiently will be able to reap the benefits. Those that don't will lose money, market share, and their livelihood. |
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Neal: What mistakes have you seen traders make? |
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Andy: The mistakes have been documented in countless books on the subject. Some of the more common mistakes I have seen include the following, not necessarily in order of importance: |
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1. Trading on emotions. I call it the "I'm right, but the market is wrong" syndrome. You hear traders say things like "Boy, I really called this market right today" or "Man, I read this market all wrong." The human need to be "right" clouds rational thought as to what the appropriate action might be in a quickly changing set of circumstances. A corollary to this in technical traders would be "My system just doesn't trade well in this type of market.'' The best traders, who make profits over the long term, take as much emotion out of trading as possible, regardless of dollar value. They liquidate when they are incorrect. When they have a |
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