{"id":26541,"date":"2016-09-22T00:00:00","date_gmt":"2016-09-22T00:00:00","guid":{"rendered":"http:\/\/stredesign.com\/the-evolution-of-day-trading-by-chris-dunn\/"},"modified":"2019-12-18T08:10:06","modified_gmt":"2019-12-18T08:10:06","slug":"the-evolution-of-day-trading-by-chris-dunn","status":"publish","type":"post","link":"https:\/\/speedtrader.com\/the-evolution-of-day-trading-by-chris-dunn\/","title":{"rendered":"The Evolution of Day Trading by Chris Dunn"},"content":{"rendered":"

What is Day Trading?<\/h2>\n

If you\u2019re reading this, there\u2019s a good chance you are familiar with day trading. That said, let\u2019s get started with a quick recap:<\/p>\n

Day trading is, \u201cBuying or selling a financial instrument within the span of one day.\u201d<\/em><\/p>\n

\"Day<\/p>\n

Day trading is not limited to stocks. There are a variety of different financial instruments you can trade and even more ways you can trade them. For example, a \u201cscalper\u201d may place hundreds or thousands of trades a day, getting in and out of positions in seconds, whereas a \u201cpivot to pivot\u201d trader will typically hold stocks for 20 minutes to 2 hours. The following tips are designed to appeal to a variety of different types of traders.<\/p>\n

A Little Bit About Me<\/h2>\n

My name is Chris Dunn and I\u2019ve been involved in day trading since the early 2000\u2019s. Currently, I run a site called ChrisDunn.com<\/a> where I help others create the financial freedom and lifestyles they desire.\u00a0I initially became interested in day trading while working at a mortgage company and seeing many of my colleagues profiting from the markets. This was during the time when day trading started becoming more accessible, as high-speed internet prices were becoming affordable and technology was becoming more prevalent in the markets. I\u2019ve been trading ever since then and, as you can probably imagine, I\u2019ve seen a lot of changes in the world of day trading.<\/p>\n

\"Chris<\/p>\n

The Evolution of Day Trading<\/h2>\n

This post isn\u2019t designed to give you a play-by-play history of the stock market. You can read about the history of the stock market on plenty of other sites. Instead, I want to focus on the most prominent impacts of market changes on day traders.<\/p>\n

There has been a dramatic shift in the trading arena.<\/p>\n

Trading by its very nature is a competition. Traders are constantly trying to outsmart the rest of the market in hopes of making a profit. It\u2019s important to think of day trading as a competition because this allows you to focus on a very influential factor in your success: the competition. Whenever you enter a position, another trader exited a position, and vice versa. This begs the question, \u201cwho is on the other side of the trade?\u201d<\/p>\n

When organized trading was first popularized, humans were trading with other humans. Picture a classic trading pit with frantic floor traders running wild, shouting, and competing to get their orders filled. As chaotic as this may have been, it created somewhat of a leveled playing field. Fast forward to present day and the old trading pits reflect an outdated trading world.<\/p>\n

\"Trading<\/p>\n

Since the late 90\u2019s, technology has played a major role in day trading. During this technological shift, engaging in the stock market became increasingly convenient. Gone were the days of calling your broker to enter or exit a position. Traders could now place trades directly from their computers. While this newfound convenience was great for the market, it opened up the door to a new kind of beast.<\/p>\n

Remember before when we discussed how trading used to be a \u201chuman to human\u201d activity? That changed forever around 2007-2008 as high frequency trading and sophisticated algorithms<\/a> crept into the markets. All of a sudden, \u201chuman to human\u201d trading started shifting to \u201chuman to computer\u201d trading.<\/p>\n

\"2007-2008<\/p>\n

So, what\u2019s the big deal? Technology is always advancing, right? While the advancement of technology is inevitable, the repercussions have significant impacts on the trading arena. Day traders are no longer competing amongst themselves and trading with \u201cAverage Joe\u2019s.\u201d Instead, they are competing against computerized strategies programmed by PHD\u2019s and mathematicians.<\/p>\n

The trading arena has shifted from competitive to hyper-competitive.<\/p>\n

Trading algorithms can yield trading results that are unfathomable for the best of traders. Even further, companies are spending millions of dollars just to shave milliseconds off of order execution time. Wall Street no longer looks like the clich\u00e9 image most people imagine. Trading pits have been replaced by warehouses filled with advanced computers, and floor traders have been replaced by highly intelligent, emotionless algorithms. This shift rendered many previously successful trading strategies useless.<\/p>\n

So, what does this all mean for you? Is day trading dead? Not quite. Stick with me.<\/p>\n

How Do You Compete in Today\u2019s Trading Arena?<\/h2>\n

The evolution of the stock market is not intended to scare you away from day trading. It should be eye opening, not disheartening. There are plenty of day traders who still make a consistent living with their trading strategies. That said, there are a few considerations to keep in mind when entering the dog-eat-dog world of trading.<\/p>\n

Only Trade When You Have an Edge<\/h3>\n

Becoming a successful trader is all about finding your edge in the markets. Unless you can find this edge, you are wasting both your time and money. So, what exactly is an edge?<\/p>\n

An edge means you can actively partake in trading and expect to yield positive returns. The key element here is being able to quantify your edge. You can\u2019t simply claim, \u201cI\u2019m smart so obviously I\u2019ll make money.\u201d Like everything in the finance industry, you need to be able to back your claims with data in order to quantify your edge.<\/p>\n

Ask yourself questions like:<\/p>\n