These days computer and algo trading do most of the volume in the US. Stocks move very fast and at a very thin volume. This creates some nasty challenges for the individual daytrader. Either you have to compete on the same terms as them (or trade with them), or you have to do something different.
The algo trading is performed mostly by big institutions and with a lot of resources, both human and financially. To compete directly with them I will certainly lose. However, the possibility to trade with them should be a viable option. This is easier said than done. You need trading programs that can take you in and out of positions automatically. There is no way you can trade often and quickly enough by doing it manually.
Personally, I know very little programming. I cannot even make simple programs in Excel writing VB. Therefore I have decided to go another route, namely developing strategies which I believe should have the least impact from algo traders. For example: holding ETFs or stocks from open to close. These criteria might be based on yesterday’s performance, if it is news in the stock, where it opens relative to other stocks etc. There are a lot of opportunities. Later I will give some examples of this.
– What challenges do individual day traders face in the current stock market environment?
Individual day traders face challenges as computer and algo trading have led to rapid stock movements with low trading volumes.
– Are programming skills essential for day traders to develop effective strategies?
Developing trading strategies doesn’t always require advanced programming skills. Traders can focus on strategy development and use automated tools for execution.
– What is the advantage of developing strategies with minimal impact from algo traders?
Strategies designed to minimize the impact of algo traders can offer more stable and predictable trading conditions for individual traders.