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spreads cannot get executed within the theoretical parameters of the desired strategy. Floor brokers are usually charged with the task of setting up spreads, and your ability to fine-tune your situation on a minute-to-minute basis is virtually nonexistent. This can cause frustration levels to get very high. |
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Other problems are encountered in beating the spread: The quoted prices shown on the quotation services are not always accurate, specialists and market makers who are located on the trading floor "step" in front of your orders, and you as a customer are usually the last person to get serviced. Many times your "spreads" are executed only when no other "professional" wants them at that particular level. When I worked on the floor of a major futures exchange, it was common knowledge that "locals" came firstthen brokers would worry about filling customer orders. (I recognize that I am mixing trading on an exchange with trading on Nasdaq in this section.) |
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Many Market-Maker Advantages Have Been Eliminated |
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Today, a quality trading system gives you all the information you need and executes your trade as quickly as possible. The major delay is the time that it takes you to make up your mind. |
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Simply put, the former market structure gave the industry professional so many advantages that the individual trader was most assuredly at a statistical disadvantage. This is similar to one's chances in a gambling casino, where virtually every bet you make is at a statistical advantage to the house. For example, in most casino games, even if you are an excellent player, the odds will be against you. This will ultimately spell disaster if you play long enough. Why do you think the hotel "comps" you if you guarantee to play for many hours? The casino knows the odds and relies on them to assure a relatively stable source of profitability based on overall handle. If you "card-count" and gain a slight statistical edge, the casino will throw you out. Wall Street operates in a very similar way when dealing with active day traders. |
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