Device Protects Day Traders From Emotional Trading 260
Philips Electronics, a Netherlands-based company, has come up with a device designed to protect day traders from emotionally based trading decisions. The Rationalizer measures your galvanic skin response and lets you know when you are under stress. An online trader can then take a "time-out, wind down and re-consider their actions," according to the company. This may have come too late for us, but at least future generations won't have to live through the horror of angry day trading.
galvanic skin response = wheatstone bridge (Score:5, Informative)
Re:Is day trading a good thing? (Score:5, Informative)
Day trading seems more like gambling than responsible ownership. Doesn't it create an unacceptable moral hazard?
I don't think you understand what a moral hazard is. Moral hazard refers to the concept that people who are isolated from risk (i.e: mega-corps that get bailed out when they fuck up) won't behave as rationally as those that are fully exposed to said risk. I don't recall many (any?) day traders getting bailed out during our recent round of corporate welfare.
Re:Is day trading a good thing? (Score:5, Informative)
Re:Contribution to society? (Score:5, Informative)
Day traders create and provide liquidity.
Re:Is day trading a good thing? (Score:3, Informative)
For instance, a case [nytimes.com] reported by the NYTimes in which a firm that does something useful is essentially looted by a private equity firm, who bought up the company's stock on debt, and then promptly assigned the debt that they used to buy up the company to the company they just bought.
Private equity firms get $750 million, Simmons Bedding Company gets bankruptcy. It makes the stuff Michael Milkin was pulling in the 1980's seem positively nice and friendly by comparison.
Re:Is day trading a good thing? (Score:3, Informative)
Why should a tuna let itself be eaten by a shark
The tuna in the example are day traders who lose money. They knew the risks when they bought stocks (unless they were lied to by one of those "OMG DAYTRADERS ARE ALL RICH" books, but that's a different problem).
when the tuna is a citizen of a democracy where it can vote to outlaw sharks?
This is democracy we're talking about, so presumable the crappy day traders could put a cap on the IQ of people doing trading, and also forcibly retire them after 5 years (thus outlawing "the sharks"). I don't think it would have the happy ending you're hoping for though.
I assume your real question is "Why shouldn't I pressure the government into outlawing daytrading or the stock exchange" and the answer is that (a) everyone who risks they money by buying stocks knows that they could loose it, (b) the stock exchange benefits society by providing capital to new businesses, (c) day trading benefits the stock exchange by adding liquidity (look at the other posts for descriptions of this), and (d) it's none of your business -- even if, as some people assume, day trading is useless, it's just as useless as professional sports. People who hire professional athletes think that they are worth the millions they get paid, and the stock market as a whole seems to think that traders are worth what they are paid. Just remember, you're not their customer.
Re:Is day trading a good thing? (Score:3, Informative)
I see. You think capitalism is supposed to reward hard work. Hence all those millionaire construction workers and gardeners.
What I'm saying is that your premise is flawed. Capitalism is not supposed to reward "hard work". It's supposed to reward success, and if that seems nonsensical it's because your point and implied question are stupid - Capitalism isn't "supposed" to do anything but allow individual actors the ability to engage in consensual business.
Re:Is day trading a good thing? (Score:4, Informative)
Re:Is day trading a good thing? (Score:4, Informative)
Stock trading is meaningless for day to day operations of a company?
Actually yes, it mostly is, unless (as I said) that company is seeking to raise more capital. The stock price has no direct bearing on how much cash the company has in it's bank accounts. It has no direct bearing on whether or not their products will succeed in the marketplace. It has no direct bearing on whether or not a tornado will level their factory.
Being useful certainly isn't required. But being useless shouldn't be respected, should it?
Please explain to me why day traders are "useless". As I said in another post, if nothing else they provide needed liquidity in the marketplace.
How many people can't retire now, because the value of their 401k has dropped?
That's their own damn fault for having so much of their nest egg in volatile investments so close to retirement. For every story you can came up with of someone who can't retire I can counter with a story of someone in his 20s, 30s or 40s who is making a killing. I'm currently up 65% on the investments that I made as the market was tanking. My 403(b) is still down, but why would I care about that? I'm not going to retire for 40 years.
Are you saying day trading can not affect the value of people's 401k?
Day traders and short sellers can't drive down the price of a healthy company over the medium to long term. In the short term they can have an affect but nobody (who is sane) is holding stock investments in a 401(k) for the "short" term, are they?
It sounds as though you are claiming that all this hair trigger, instant trading has no effect outside of the parties involved, no externalities that affect individuals retirement or other accounts, or even entire economies
No, I've claimed nothing of the sort. I've only claimed that day traders can't "kill" an otherwise healthy company. I'm still waiting for you to produce some evidence to the contrary. Am I waiting in vain?
And yet, we've all seen lots of articles regarding automated day trading, and how it does exactly that.
Automated trading does some stupid shit. I recall the price of an airline being driven down to almost nothing [newser.com] over automated trading when a false report of their bankruptcy was published. I don't think it happened that long ago either. Would it surprise you to learn that even though the airline's stock dropped 99.92% that they remained in business? This would seem to run counter to your notion that traders can "kill" an otherwise healthy company.
Re:Is day trading a good thing? (Score:2, Informative)
They provide liquidity to businesses to fund their operations and grow. When business grow, people get hired and are able to put food on their table and pay for their kid's education. That is the point of capitalism.
Re:Is day trading a good thing? (Score:3, Informative)
"But financially, this is of no benefit to society, or the companies whose stock you're trading."
Wrong on both counts. The existence of day traders ensures a steady volume of trades for many stocks that would be lightly traded otherwise. This means longer-term investors can get into or out of a position without excessive volatility. Although day trading can cause some minor volatility on its own, the effect is more of a smoothing action, keeping the stock price roughly aligned with investors' analysis of future earnings. As for your reference to IPOs, who would ever buy an IPO if there was no active market to sell into at some point in the future?
As an added bonus, day traders help ensure market efficiency. Overpriced stocks get sold, underpriced stocks get bought up. Day traders help reduce the amount of time these out of balance conditions exist. Without them, stock price manipulation would be even easier than it already is.
Even for short periods of time, somebody has to put up the money to hold all of the shares on the stock market. Consider two extreme examples: Investor A is a day trader who runs a $1M portfolio split among 50 companies with 100% turnover every day for 5 years. Investor B invests $1M in one company's IPO and lets it sit for 5 years. Which contributes more to the market cap of the stock market? They are both EQUAL, because each has $1M invested every day of the year.
If the market worked any other way, there would be too many disincentives to investing. Nobody would do it. Where would we be then?