It had become almost bizarre to trade U.S Stocks.. The market rockets in one direction or the other within minutes and none of it can be explained by technical or fundamental analysis or news. The retail investor has chosen not to participate and has stayed away. This time they clearly recollect the last market collapse that left may in total disbelief and much poorer.
The market has plainly become schizophrenic and leaves most watching in total incredulity. As the retail has left, he has been replaced by Quant traders who locate their computers next the exchanges to squeeze and advantage over their competitors This is the stock market in 2010 and things have been made worse by the Quant’s who trade in milliseconds for a penny or less, disregarding all fundamental and technical analysis. More than 50% of the trading volume each day is now attributable to the Quant's or computerized trading
We are witnessing a major paradigm shift in the markets and its hard to envision that things will revert to the way things used to be. Have you ever questioned why on days that awful economic news comes out and the markets shoot up? It time to understand that computers do not read the Wall Street Journal. It has nothing to do what we term reality; It merely how they can make money
So what is an investor left to do? It appears that Quan't will increasingly account for a larger share of the trading volume, leaving the the retail investor and trader seeking for other places to invest. Many retail investors already believe the market is rigged. It may appear that way, but what is happening is that the Quan'ts have so much money and computer power that they can move markets and you cannot compete with them. The number of U.S. household that owns stocks has dropped to a low of just about thirty seven percent from the usual mid fifties. It does not appear that these investor will ever come back. The trend has been in place for a while now and seems to be irreversible. Why should they invest in U.S. Stocks? The Dow Jones Industrial average has had a negative return for the past ten years when adjusted for inflation and is nearly at the same level it was then.
So what options are they looking at? Some have started to invest in emerging market since they fell that it provides greater returns with comparable risk Others, as as evidenced by the record price in gold and silver, have flocked to the precious metals. The changes in the markets are here to stay and so is the dominance by computerized trading. Leaving the small trader and investor searching for other arenas to be able to participate on equal footing.
Author Resource:
I have been writing articles about trading for a long time, I just finished writing an article on FX Trading Tips which you are welcomed to read at FX Trading Tips . See You there.
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