H-Man,
These same firms say that day trading hurts investors. The reality is that in the long term a stock will live or die on the companies own merits, regardless of the trader. Every one on wall street knows this. If an investor is looking long term, the day to day fluctuations are of minor concern.
If the average investor had a broker who was really looking out for him then maybe this statement could be somewhat supported. In the real world, I don't think so. Unfortunately, the world is full of brokers who could care less if their small clients take a hit when a stock starts to tumble. When day to day fluctuations become 10% moves, or 50% or 100%, way more than the typical index has historically moved in one year, then they affect everyone, most of all the small investor who entrusts his account to a broker who swears up and down he will protect the investment when in fact he often has undisclosed self interests that may be totally contrary to those of his client. (Spoken by a former client of one Duke & Company). I had several brokers before I started doing my own trading. I lost money with every one of them during a period of unprecedented market appreciation.
Where I think the argument against daytraders falls apart is the premise that daytraders are the ones causing the volatility. I believe it's a bogus argument and always has been. Sure there are a few stocks every day that go crazy, and I'm sure the daytraders are a primary reason for that, but that does not account for the volatility of the broader market. The MMs are the ones who have an entitlement that carries with it a responsibility to maintain an orderly market. They pretty much ignore that these days and do whatever they can to separate you from your money. When a stock falls 10% or more in 10 minutes or less on light volume, that's not the daytraders driving the market. It's the MMs trying to sucker you into dumping your stock cheap so they can sell it again when they bring the market back up. The problem is, you never know when to ride it out, or bail out because there is some news you have not heard yet that is making the thing fall apart. It's no wonder the big firms are recording record profits on their trading activities. When SOES became an instrument that could in fact be used to advantage by daytraders, they had it effectively dismantled. They know more than you about what is being accumulated or dumped, have large inventories they can play with to move the markets to a favorable position for themselves, and then they have you (daytraders) to blame as a smoke screen to keep anyone from calling them on it.
Some say the MMs are just doing their job. If their job is trading against the daytraders, then maybe so. As a trader I accept that I have to work with the system as it is, and not complain about what the MMs do or do not do to move the market. As an investor, I have a different view of the entire industry.
Dan |
