Home Day Trading: A Comparison To Floor Trading

By Author: David Adams
Total Articles: 41
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I always get a charge when I read about home-based day traders who are touting some new red hot system or methodology of trading based on floor trading, and belittle the existing competition because floor traders do not trade with oscillators or indicators like most home-based floor traders. As a matter of fact, they are right. Floor traders do not use the same methodology home traders utilize. Yet some traders are determined to compare home-based traders and floor traders. The general line of thinking of the promoter of the red hot new day trading system is somehow floor-based traders have a methodology that will revolutionize the home trading market.

Nothing could be farther from the truth. Floor trading and trading from your home is like comparing apples and oranges. Floor traders have a wide variety of real time news feeds (and usually a plethora of rumors) to draw upon, and if they are pit traders they have the benefit of trading with the knowledge of what other pit traders, especially the important ones, are trading and whether they are trading short or long.

Of course, the home-based trader who sits alone ...
... at his computer in his house hears none of the humdrum of the market floor, nor can he surmise any other pit activities, nor does he have access to the never-ending rumors that circulate endlessly throughout the trading day. No, stay-at-home traders have to rely upon other cues to initiate their trades. That's why it's such a hoot to hear the so-called experts in explaining that floor traders don't use indicators or other predictive oscillators most home trader use.

How in the heck would they?

By the time the market has reacted to whatever news is swirling about the market floor the home-based trader is blissfully unaware of what is going on. Granted, some of the volume figures might be of some help to the home-based trader, but again the home trader is lagging the floor trader by a considerable margin, and I doubt the volume figures would be nearly as helpful at home as they are on the floor. And you know, all these trading education experts I hear about who claim floor traders do this and floor traders do that give me serious doubts about whether or not these guys have ever seen the floor the New York Stock Exchange. If they had, it would be surprising to me that they would make such silly comments comparing home-based day trading and floor trading. You cannot trade at home in the same manner you would trade on the floor.

And the differences could go on for quite some time. The home day trader is usually trading between 2 and 10 contracts on a given trade, and a floor trader is usually trading thousands, or more, on given trade. No, I really don't see how you can compare day trading from your home and trading on the floor the New York Stock Exchange or the Chicago Mercantile exchange. It's just a ridiculous statement to make, and I suppose I am getting tired of hearing it.

Incidentally, floor traders do use certain kinds of indicators, but they are usually fairly complicated algorithms not available or even desirable for the average home day trader. So you can put the rest the notion that floor traders have some sort of sixth sense about when to initiate a trade to buy or sell. Further, he usually has a group of supervisors and market specialists calling trades for him from a corporate trading center telling him to buy and sell. No, let's lay this nutty argument about floor traders not using indicators or oscillators to rest for good. These two types of trading our different animals and bear no resemblance to each other. At home day trader is usually alone and making his own decisions, a floor trader is usually getting direction from a group of advisers telling him when to trade and not trade, along with using his own judgment as he watches the ongoing trading in whatever pit he or she may be trading.

Just for the record, there are not many pits left, as most trading has gone the way of electronic trading or is in the process of going the way of electronic trading. This trend reduces your average pay a trader to little more than an errand boy. Which I am sure neither he nor the rest of his colleagues are very excited about. Granted, there are some open outcry pits left, but their days are numbered as the markets move forward into the electronic age. And for the record, in electronic age the day traders will be using indicators and oscillators because there will be no open outcry cues for the pit trader to read. So much for the difference between floor traders and home day traders, it's like comparing apples and oranges (only the oranges are going extinct)

I am a long time retail and institutional trader who now only trades part time, usually in the morning. I enjoy writing informational articles about my style of trading so others may benefit.

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