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Chapter Two
Advantages Of DAET Trading |
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Financial Industry Impediments To DAET |
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While it is true that it makes little difference what you trade as long as you trade it successfully, your ability to trade successfully can vary greatly depending on the arena in which you operate and the number of impediments you face. The securities industry spent many decades developing an environment that gives innumerable advantages to the industry participants (the pros). Unless the individual Direct Access Electronic Trader can also obtain certain of the advantages enjoyed by industry insiders, chances of success will be minimal. |
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Some of the industry's advantages are quite obvious, while others, although very real, are barely noticeable. The biggest obvious advantage of the professional market maker, and obstacle to the day trader, is the spread. The spread is the difference between the bid price (the price at which an individual can sell) and the offered or asked price (the price at which an individual can buy). The spread represents the market maker's reward for taking risk in a transaction. The fact that a market maker can buy a stock for a lower price and theoretically sell it at a higher price is the market maker's reward for absorbing the risk of price fluctuation. For example, the quoted share price of |
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