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trading styles propel the trader to take trading profits quickly and, more importantly, not hesitate in taking losses at the appropriate time. Fluid traders enter and exit the market aggressively and never agonize over a particular trade. To them positions are just computer bytes representing opportunity to make money. |
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By trading actively and often, one automatically learns not to agonize over taking a small loss on any single trade. This trained willingness to move out of a losing position routinely puts the trader in a position in which he or she will never incur a loss of more than a few hundred dollars on any one position. This keeps the trader's head "clear." The biggest problem of letting losses go beyond a very small fraction of a point is not only the actual dollar loss on that position but rather the fact that the trader stops being productive because he or she is focusing on losing instead of making money. |
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Instantaneous access leads to far greater depth of markets. Depth of market means the amount of stock that can be traded at a given price. For example, if a stock is bid at 21 1/8, how many shares can be sold at that price before the price would have to trade at the next lower price? |
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A great deal of rhetoric had been flowing concerning the depth of market on various exchanges. Competing exchanges espouse the theory that their respective markets are tighter and offer greater depth than other exchanges. For example, a representative of the NYSE recently spoke about depth of market on his exchange, explaining that since spreads have dropped to one-sixteenth, the depth of market at each trading interval had decreased but overall depth of market had increased based upon total price. It all sounded profound, but actually there would be far greater depth of market, in my opinion, if the NYSE allowed all trading entities to display quotes and sizes instantly as they can now on Nasdaq through ECNs. I believe that size on the NYSE would be much larger |
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