The State of Daytrading

• Joshua M Brown
• July 6th, 2010

It's no secret that there is widespread suffering in virtually all areas of financial services these days.  What may be somewhat revelatory is that the market's character of late has been equally confounding for even the most nimble among us.

That's right, not all is well in Daytradingville.

James "Rev Shark" DePorre has an interesting take on the state of the daytrading business in his newsletter:

Prop trading firm Schonfeld is letting go a number of traders. What is particulalrly depressing about the news is the following statement:

"Bull and bear markets come and go. Good trading markets come and go. But unfortunately, our vision of the future of trading has changed. It is getting much tougher for traders to make a living or get by. The direct competition from black boxes, stat arb and high frequency trading which continues to grow at exponential rates is here to stay and has caused us to change our outlook for lesser skilled traders. "

It is depressing news for the individual trader but clearly for some time now the nature of trading has been quite different. It is going to stay challenging for some time and it is going to require some adapatapton if we want to continue to grow and prosper in this business.

I'm optimistic that the market will continue to evolve and that individual traders will still be able to do well but it is going to require dedication and persistence.

I know some guys who are trading extremely well in this tape, but they are fewer and farther between than at any time I can remember.  The short-term trading war stories I'm hearing from all over are pretty ugly.  Some of the blame for the industry's woes  is being placed on thinner markets, the high frequency trading algorhythmic boogie man, gaps in both directions from overseas news flow and uncertainty about new taxation.

The Rev Shark's missive backs this up as Schonfeld is one of the most successful firms in the industry.

Sign up for the Shark Investing newsletter here:  Shark Investing

Updated:  Courtney Comstock has the full letter to Schonfeld's daytraders here.

Hat Tip Gary S

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