Short term trading was much, much harder in the old days:

[mrsoul]

Greetings Fellow Traders,

I made my first trade back in 1980.
Back in those days, trading, IMO, was much, much harder.

Here's why:

1) First of all, there was no internet and, therefore, no electronic trading.
You used to have to phone in your orders.
When I first started, I didn't realize that there were many, many (I mean just about everyone) unscrupulous brokers.
These brokers would rip you off bad by front- running your orders. It took me a while to figure out what was going on- that this is how they make their living (and I mean BIG money). I finally figured out that the brokers weren't in it for the commission but rather they were in it for the sole purpose of front running the order flow.

The problem was that if you wanted to trade, you couldn't do anything about it because phoning in an order was the ONLY game in town. I tried, literally, dozens of brokers but they were all front runners, so the amount of money that you had to give up on each trade, BEFORE even putting the trade on, made trading nearly impossible- especially if you had a short term perspective, like I did, and were in and out of the market many times a day.

2) Back in those old days, when you wanted to place a market order,the brokers were legally entitled 3 minutes to give you a price fill (due to some shaky NFA rule- which was designed to protect the brokers). Sometimes the fills were quicker than 3 minutes, most of the times they were not. Can you imagine that? Having to wait up to 3 minutes to get a price report on a market order. The markets always moved fast, so getting delayed for minutes when placing a market order meant that it was nearly impossble to be profitable trading short term.

3) Since there was no internet and personal computers, a trader hardly had any tools available to him which todays traders have. There were no computerized charts, indicators, different time frames, etc.
I, like most traders at the time, subscribed to a weekly chart book which you would get mailed to you every Friday. They would have the prior charts in the book and they would also have room for you to update these charts with a pencil.
Can todays trader fathom that? Now charting is simple to access. Just click and you can get any chart you want; in the old days charting was a major, major hassle.

For all these reasons, until the advent of the internet and electronic trading,short term trading was way, way more difficult. If you were position trading, you were still at a disadvantage but not nearly as bad.

I remember reading Livermore's "Reminisciences...".
When he placed market orders, he would have to wait a long time for a fill n a market order- the brokers were front running him even back in 1901 (he didn't even know it). I guess that game is as old as the sun.

Plus, Livemore, and trader of that time, had hardly any way to accurately chart the market, at least compared to modern traders.


ANY trader who first started trading when they had the internet and electronic trading is a million times better off thann people who started trading in the old days, especially if you make many trades a day.

I wish that I had started trading with the advent of electronic internet trading. I would have saved mucho bucks and much aggravation, for the above reasons.

Are there any traders who started back in the old days who went through the same headaches?

 

[Lightning McQueen]

Interesting and informative post mrsoul, I enjoyed reading your insight from the past.

I do wonder though whether with all the modern tools at our disposal, is it indeed easier to trade now, I suspect not, judging by the stats that abound.

Perhaps trading can be said to be more accessible and easier to get into in the first instance, rather than easier to trade maybe, actual trading success is probably as hard and elusive as it's alway been.

 

[mrsoul]

Interesting and informative post mrsoul, I enjoyed reading your insight from the past.

I do wonder though whether with all the modern tools at our disposal, is it indeed easier to trade now, I suspect not, judging by the stats that abound.

Perhaps trading can be said to be more accessible and easier to get into in the first instance, rather than easier to trade maybe, actual trading success is probably as hard and elusive as it's alway been.

Agreed Lightning.
Trading today is probably just as difficult as it was in the old days due to the statistics that you mention.
However, my point is that in the old days, short term trading was not just as hard as it is today, it was IMPOSSIBLE because of all the above reasons.
The actual trading is probaly equally as difficult regardless of the decade or century that you trade in, but in the old days, the problem executing orders and lack of proper tools made short term traing nearly impossible.

 

[arabianights]

What you aren't mentioning is that if you wanted to be a short term trader then you were perfectly at liberty to pay for a place on the floor and then things would be in your favour in a way that isn't possible now...

 

[trader_dante]

I remember reading Livermore's "Reminisciences...".
When he placed market orders, he would have to wait a long time for a fill n a market order- the brokers were front running him even back in 1901 (he didn't even know it). I guess that game is as old as the sun.

Plus, Livemore, and trader of that time, had hardly any way to accurately chart the market, at least compared to modern traders.

That's why Livermore used multiple brokers and often needed to employ various clever ways of exiting large positions.

As for charting the market...I personally believe that the fact it's now made so easy is just another reason that so many people fail.

If people would only put in the work and chart the market by hand they would understand a huge deal more and get further on the road to profitability.

 

[Rossini]

What you aren't mentioning is that if you wanted to be a short term trader then you were perfectly at liberty to pay for a place on the floor and then things would be in your favour in a way that isn't possible now...

Can you expand on that arabianights?

 

[NetTecture]

In addition, comissions were higher. My first exposure o the markets was as IB around 18 years ago Customers regularly paid around UDSD 60 for a round trip, and USD 45 was seen as a good price (plus exchange fees) Retail (non floor) traders were at a serious disadvantage for anything but "turtle style" trading (i.e. long term). One COULD make money short term, but transactio ncosts were HIGH, and the software / satellite feed was a lot more expensive than most options today.

 

[mrsoul]

What you aren't mentioning is that if you wanted to be a short term trader then you were perfectly at liberty to pay for a place on the floor and then things would be in your favour in a way that isn't possible now...

This is true arabianights.
Even back then as a floor trader you were guaranteed crisp executions.
I traded bonds for a while on the CBOT.
However, trading on the floor prohibits one from using up to the second charts to make market decisions. When you are on the floor, you really can't sit at a desk all day and concentrate on live charts- a method I much prefer to floor trading and, also, back then existing charting capabilities were very limited.
At that time, a company called Commodity Quote Graphics was one of the first vendors to provide live charts on the computer. However, it was very expensive to lease a CQG machine to do this- it cost, at that time, around $2,000 a month and provided nothing near the charting capabilities you can get today.

 

[mrsoul]

In addition, comissions were higher. My first exposure o the markets was as IB around 18 years ago Customers regularly paid around UDSD 60 for a round trip, and USD 45 was seen as a good price (plus exchange fees) Retail (non floor) traders were at a serious disadvantage for anything but "turtle style" trading (i.e. long term). One COULD make money short term, but transactio ncosts were HIGH, and the software / satellite feed was a lot more expensive than most options today.

Exactly nettecture.
Commissions were very high back then; combine that with thieving brokers, long entry/exit delays, and inadequate equipment and you have a recipe for disaster.

 

[donaldduke]

In the really old days livermore got instant fills at the bucket shops. I think the bucket shop era began in the 1800s and lasted several decades in the US, until they eventually died out. Ofcourse they limited the size of winning punters like the SBs still do today, so werent very scalable for day trading. I suppose it wasnt until the internet that retail punters got instant fills again.

As for transaction costs, if you paid $60 roundturn for a large S&P contract in the 1980s or 90s that wasnt too bad, the orginal S&Ps were 10x the size of the current e-minis.
If you had a good broker and used limit and stop orders, rather than market orders, it may have been possible to day trade the S&Ps if you kept to just one or two trades a day.

 

[NetTecture]

that is what ****ed him in the real exchange. he was used to instant fills, while in the exchange it took the him time to get the order on the floor

Forget the large S&P - the price was for EVERYTHING. Even wheat contracts

 

[mrsoul]

In the really old days livermore got instant fills at the bucket shops. I think the bucket shop era began in the 1800s and lasted several decades in the US, until they eventually died out. Ofcourse they limited the size of winning punters like the SBs still do today, so werent very scalable for day trading. I suppose it wasnt until the internet that retail punters got instant fills again.

As for transaction costs, if you paid $60 roundturn for a large S&P contract in the 1980s or 90s that wasnt too bad, the orginal S&Ps were 10x the size of the current e-minis.
If you had a good broker and used limit and stop orders, rather than market orders, it may have been possible to day trade the S&Ps if you kept to just one or two trades a day.

I used to trade those big S&P's, in those days.
I agree that if you used only stops and limits , and made just a couple of trades a day, it was better than placing market orders.
However, there were times when you had to cancel and replace (as they used to term it) your limit or stop and it took FOREVER to do this.
Plus, the brokers would always give you a hard time when canceling and replacing orders-as though you were really bothering them.

 

[theSheik]

ahhhhh, nostalgia ain't what it used to be