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.
One should not be mandator for posting here (Score:3, Insightful)
Hell, yeah, I was under stress! (Score:3, Insightful)
I was stressed out about how I needed to make this trade RFN so I could retire to a small island nation - MY OWN!
Stupid galvanic response thingie made me wait until after the bubble burst.
Re:I've known a lot of day traders. . . (Score:5, Insightful)
Another market (Score:2, Insightful)
Is day trading a good thing? (Score:5, Insightful)
I'm wondering how day trading, as an activity, benefits society. Sure, if done right, it can benefit the individual, but what use is it to the average person? It seems to promote the tragedy of the privates. That is, privately owned resources will be used unsustainably and depleted because the owner can simply take the profits and reinvest them into rapidly depleting some other resource. Communally managed resources will be used sustainably because no one person can abscond with the profits and reinvest them in some other resource depletion scheme. Day trading seems the perfect example of this. Day traders have no connection with the companies they trade in, no commitment to them, no stake in them at all.
With other industries, one can easily see how they benefit society, yet day trading seems to provide no benefit. Maybe someone who understands the function of day trading better than I do can explain what purpose it serves besides making a few individuals rich at the expense of everyone else. Day trading seems more like gambling than responsible ownership. Doesn't it create an unacceptable moral hazard?
Re:Prediction... (Score:2, Insightful)
It's not only part of the job.. I suspect that for most traders it becomes the main reason to continue trading.
Re:Is day trading a good thing? (Score:4, Insightful)
They create no products and provide no services. I think that's all anyone needs to know about how capitalism supposedly rewards hard work.
Re:Is day trading a good thing? (Score:5, Insightful)
That doesn't sound useful (Score:5, Insightful)
I'm a trader by profession (although not a day trader) and making emotional decisions is about the worst thing you can do. The only worse thing is NOT making a call because you happen to be excited.
It's a learned behaviour, but a trader needs to be able to abstract away from the trade. You almost need to pretend that somebody else is doing the trade and you're just watching. I think any trader who stays in the job learns this skill eventually. The first time I traded a few million dollars of risk, I was down to few last red cells in my adrenaline stream. If I kept going that way, I'd be either an unemployed or an alcoholic (or most likely both). Instead I learned not to take it too personally. Now a large trade barely increases my pulse.
I don't think a device can replace this behaviour. In a fast market my heart may be way up due to working on several things at once and trying to keep up with the information. I still need to make trades, I just need to stay rational. A glorified heart rate monitor won't help with this.
Re:Is day trading a good thing? (Score:2, Insightful)
I think I do understand what a moral hazard is. Day traders are isolated from the risks they create, not because of any bail out, but because they can simply reinvest their money into something else after ruining a company. They have no incentive to look after the long term welfare of the companies they invest in. That is a moral hazard. They can create risk for the companies they invest in, while being isolated from that risk.
Re:Is day trading a good thing? (Score:3, Insightful)
Day traders can't "ruin" a company that's sound. And how can you claim that they are "isolated" from risk when they risk losing massive amounts of money on a daily basis?
Re:Is day trading a good thing? (Score:2, Insightful)
It's not a direct impact, but knowing you can later sell your shares on the stockmarket gives you more of an incentive to invest in the first place.
Thanks (Score:3, Insightful)
Thanks for the informative answers, that makes a little more sense to me now. It's amazing our economic system works at all. Of course, it also can fail spectacularly as we've all seen. I've never understood the people that think a bunch of unregulated greedy jackasses all trying to make a buck will somehow magically make a fair and sustainable society and economy.
Re:Is day trading a good thing? (Score:3, Insightful)
Oddly enough, day-trading would probably be non-existent if not for government intervention in the markets in the form of the "limited liability coroporation".
If someone took on the legal liabilities of anything they invested in, they'd not invest without a great deal more thought.
Re:I've known a lot of day traders. . . (Score:4, Insightful)
Not only that, but the first time a trader can't make a trade because the device tells them to chill out, that sucker is flying through a window.
First thing I thought of as well. When money is on the line, they'll find some way around the device. The thing to keep in mind here is that keeping a trader from making trades is the absolutely worst thing this device can do. And it doesn't protect from the worst mistakes: fat finger trades (where the trader makes some grossly expensive typo, though I suppose excessive stress makes this sort of error more likely, it can happen at any time) and double down trading (where the trader is certain they're right and keeps betting the wrong way, "The market can remain wrong longer than you can remain solvent.").
Re:Contribution to society? (Score:3, Insightful)
Sure. Day traders lose money (on average), which is then distributed to people who aren't day traders.
Re:Is day trading a good thing? (Score:3, Insightful)
Re:Dividends? What dividends (Score:3, Insightful)
Dividends, which is what you are talking about, have not been paid in years.
Dividends are alive and well where I live. I haven't looked at the US market in a while but I thought it was only the tech stocks that weren't paying dividends.
Without dividends, all that is of interest to investors is the stock price increasing, and for that to happen, the company must report increases and logarithmic growth year after year, which is unsustainable in the long or even medium term.
Without dividends, the earnings simply stay in the company itself instead of being paid to you. They don't vanish. Look at it this way... image the company doesn't pay them to you but instead puts them in a company bank account. The price of the stock must rise because the assets on the books are now higher than last year and, as a stockholder, you own a portion of those assets. You make it sound like the earnings will cease to exist if they aren't paid as dividends. But they still do exit. They're just in the company (which you own) instead of in your bank account (which you own). And if you trust the company enough to buy their stock in the first place, then you probably aren't going to mind if they hold on to your dividends. This simplifies your taxes and allows them to use the money when opportunities arise to make the company still stronger and further increase the company value.
Devon